The federal government will halt a US $1.4-billion brewery project in Mexicali, Baja California, after citizens overwhelmingly rejected it in a referendum held over the weekend.
Diana Álvarez, deputy interior minister for democratic development and social participation, announced on Monday that 76.1% of almost 37,000 people who cast a vote on the controversial project under construction by the United States company Constellation Brands opposed it.
The brewery is about 70% complete, with about $900 million having been invested to date.
Local residents, especially farmers, have long argued that the operation of the brewery would threaten the local water supply – a claim that Constellation, which produces Corona and other Grupo Modelo beers, rejects.
Álvarez said that as a result of the referendum, the National Water Commission will not issue the permits that Constellation still needed to obtain in order to open the brewery, which had been expected to begin operations at the end of 2021.
The deputy minister added that the government would immediately contact the company to “try to find” alternative options and to speak about compensation.
For his part, President López Obrador said that Constellation has to “respect the decision of the people.”
“I think [the company] will understand when there’s a result like this one,” he said.
López Obrador, who announced earlier this month that a vote on the brewery would be held, had expressed his own opposition to the project although the government distributed a leaflet last week that said that the operation of the brewery would not pose a threat to the local water supply.
The president stressed on Monday that his government is not opposed to foreign investment and said that he would talk to Constellation executives about the possibility of finding an alternative site for the brewery in Mexico. The company has said that it would consider relocating its brewery project to another country if Mexico became too problematic.
After the results of the referendum were announced on Monday, Constellation’s shares dropped by 8%.
The government’s decision to hold a vote on the brewery triggered strong criticism from leading business groups in Mexico.
The Business Coordinating Council (CCE) said in a statement on Sunday that the consultation posed a threat to Mexico’s capacity to attract investment and increased “the economic risk we face due to instability in the financial markets, the [falling] oil price and the international upheaval caused by the Covid-19 pandemic.”
Released before the results of the vote were known, the statement said that the consultation placed jobs already created by Constellation’s investment as well as those that would be created in the future at “serious risk.”
The CCE, an umbrella organization that brings together 12 groups including the Mexican Employers Federation (Coparmex) and the Mexican Business Council, said that the staging of the consultation violated the federal government’s recommendation to suspend large events due to to the growing spread of coronavirus in Mexico.
Coparmex chief Gustavo de Hoyos claimed that, “like in the old times,” people were coerced or given incentives to vote against the brewery project and provided with transportation to polling places to do so. He said that cancellation of the project would send the wrong message to the rest of the world.
“Production of the most famous Mexican beer in the world is prohibited in Mexico – who’s going to want to invest in a country with such contradictions and absurdities?” de Hoyos asked.
The Mexican Institute of Finance Executives also weighed in, stating that the brewery vote undermined certainty for investors and job creation in Mexico.
The referendum was the latest in a series of “direct democracy” exercises favored by López Obrador, who often says that the people are “wise” and know what is best for the country.
The president canceled the previous government’s US $13-billion Mexico City airport project after a legally questionable vote held before he took office, while his administration’s infrastructure projects, such as the Maya Train, have received strong support in other referendums.