Mexico's president alleges corruption in Constellation Brands brewery project

by Reuters
Wednesday, 25 March 2020 21:16 GMT

(Recasts, adds comments by president)

MEXICO CITY, March 25 (Reuters) - Mexico's president on Wednesday alleged corruption in brewery project worth more than $1 billion that was rejected in a referendum over the weekend, promising to review how permits were issued to the venture by U.S. brewer Constellation Brands.

President Andres Manuel Lopez Obrador offered no evidence to back the allegations. His leftist government has faced fierce criticism from business groups who say cancelling such a major U.S. project will further dent weak foreign investor sentiment in Mexico.

Lopez Obrador has embraced public consultations as a way to resolve knotty issues, but his critics say the president is using local referendums to mothball projects he doesn't like. Others say the cancellation undermines legal contracts in Mexico.

Mexico's economic growth had ground to a halt even before the coronavirus outbreak, with analysts blaming the president's unpredictable policies and preference for state involvement in the energy sector for a sharp drop in business sentiment.

After assuming power in December 2018, Lopez Obrador rolled back energy sector reforms that brought in billions in investment. He also scrapped the partly built $13 billion Mexico City airport project and forced the renegotiated of natural gas pipeline contracts.

The brewery project in the border city of Mexicali was rejected by three-quarters of the residents who voted, but only 36,520 people out of a population of 1 million participated. Opponents said the plant poses a threat to the local water supply in the desert region.

Lopez Obrador on Wednesday suggested irregularities in how water permits were obtained for the plant, without offering proof against one of the biggest U.S. beer brewers, which makes the Corona and Modelo brands for the American market.

When asked by a reporter at his daily morning conference if there was corruption involved in obtaining permits, Lopez Obrador said: "Of course, influence's just a matter of thinking, common sense."

"How can you give a permit for a brewery that consumes water (in an area) where there is a shortage of water."

Constellation Brands did not respond to a request for comment over Lopez Obrador's comments. The company had in the past said that the brewery, which is partly built, would affect less than 1% of local water supplies and that it had all necessary permits.

On Tuesday, Constellation said it has confidence it would maintain its relationship with Mexico and was ready to speak with Lopez Obrador.

The rejection of the plant, touted by the previous government as one of the biggest foreign investments of recent years, follows the demise of the Mexico City airport project which Lopez Obrador scrapped a few weeks before taking office.

Both cancellations were the result of referendums he had pitched as exercises in local control. Both had low turnouts.

Lopez Obrador said the government would enter into discussions about compensating Constellation Brands for the project, but it was unclear if Mexico would have to pay.

"We don't know because we will have to see, we will review the case, how the permits were given," Lopez Obrador said, pointing out that the deal was struck under the previous regional government in Baja California state.

"Now, no longer can agreements be reached above, by the elite, no." (Writing by Drazen Jorgic)

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