AMLO turns to national security to defend rail expropriation

Mexican President Andrés Manuel López Obrador (AMLO) has defended Friday’s expropriation of part of the Ferrosur rail concession belonging to Grupo México Transportes (GMXT), in the Tehuantepec isthmus. 

The takeover of GMXT’s facilities by navy personnel only added to investor concerns over AMLO’s attempts to increase the role of the State in several sectors.

During his morning press conference on Monday, AMLO (pictured) said he had issued the expropriation decree to avoid the risk of a future privatization of the railways and as a matter of national security and public interest.

The three stretches of lines Z, ZA and FA will now be operated by state-run Ferrocarril del Istmo de Tehuantepec, and become part of the government’s Tehuantepec isthmus rail corridor project. The stretches run from Medias Aguas to Coatzacoalcos, from Hibueras to Minatitlán, and from El Chapo to Coatzalcoalcos.

The railways “belong to the nation” and the expropriation is “completely constitutional and legal,” AMLO said, adding that revenue from the railways would go to pensions for the armed forces. The president also denied it was an attack on conglomerate Grupo México’s powerful CEO, Germán Larrea, with whom he has clashed in the past.

AMLO ruled out that the government would pay the 9.50bn pesos (US$534mn) that GMXT had asked for the stretches. He said there would be a valuation process and that compensation would be paid if merited.   

GMXT said it was surprised by the expropriation and added it would continue negotiations with the government regarding its rail concession.

Grupo México has been in recent talks with the government regarding its plans to acquire the retail operations of Banamex, which is one of the largest lenders in the country and owned by US banking giant Citigroup. The government has made it clear certain conditions need to be met for the deal to obtain regulatory greenlight. 

Citigroup has not yet announced who will buy Banamex, and according to AMLO that process has no relation to the Ferrosur expropriation.