There’s Still Hope for Constellation Brands’ Breweries


Photo: FDF World

By RICARDO CASTILLO

The cancellation of the Constellation Brands brewery construction in Mexicali has so many political and economic offshoots that they are impossible to cover in one journalistic article. But here are some of them:

The people of Mexicali voted against the brewery not because they do not want foreign investment in their region, but because the Constellation Brands project is a water-intensive beer factory. Historically speaking, the so-called Mexicali Valley — really the Colorado River Basin — has indeed had water problems.

Once upon a time, the Colorado River poured freely into the Gulf of California and the Mexicali basin was a blossoming garden of earthly delights. This came to an end after the 1849 gold rush – European settlers rush, really – when the states of Colorado, Utah, Arizona and California were funded as the modern U.S. west.

Since those days, the states began hoarding Colorado River water. Today, there are 24 water dams along the way – including the massive Hoover Dam shared by Nevada and Arizona – so by the time the river gets to its Baja California end, it only trickles saline water – leftovers from fertilizer – into the once paradisiac river mouth, now a mere paramo.

And this is where Mexicali, besides a scant number of aquifers, gets its water. It’s something, but not much, and according Mexicali Valley inhabitants, insufficient to feed a brewery’s needs.

Just how did Constellation Brands get the idea it could set up shop in dried up Mexicali for a water-intensive operation is not just anybody’s guess. First it was enticed by the former Baja California state administration, then headed by Governor Francisco (Kiko) Vega De La Madrid of the now-minority National Action Party (PAN), and given a firm push by former Institutional Revolutionary Party (PRI) President Enrique Peña Nieto.

In the eyes of many Mexicali residents, known by the moniker of Cachanillas, the awarding by Kiko Vega of the aquifer to Constellation Brands was not only politically incorrect, but an act of outright corruption. Rumor has it that he got a humongous kickback for permitting the construction.

The PAN ruled Baja California unchallenged during 28 years, but lost during the 2019 elections and the new governor, Jaime Bonilla of the National Regeneration Movement (Morena) won the governorship by landslide. With the shift of directional power, the mega project began to tear at the seams.

Most noticeable has been the protests supported by Senator Alejandra León Gastélum of the radical left Labor Party (PT), who also enjoyed the backing of Morena. León Gastélum was a key organizer of the movement against the brewery, which came to the attention of the Environment Secretariat as the backing she’d gotten from voters was noticeably high and politically influential.

On Feb. 26, 2020, Environment and Natural Resources Secretary Victor M. Toledo Manzur announced that the continuity of the construction of the Constellation Brands brewery would have to be subjected to a referendum, given the enormous amount of people who were worried about the loss of potable water.

León Gastélum was euphoric because the people of Mexicali were going to decide “whether it stays or goes.”

Constellation Brands Mexico manager Daniel A. Baima protested through a letter to President Andrés Manuel López Obrador (AMLO). Baima was against holding a referendum not only because the plant had already been under construction for six years, but because the investment was already up to $900 million.

“As you can imagine, this represents a great blow to the good work carried out in good faith by those involved, including the federal government,” Baima wrote. He also noted that the construction had already advanced by 70 percent.

Balna also reminded AMLO that this would be the third brewery Constellation Brands built in Mexico, including the one in Nava, in the state of Coahuila, and another one in Ciudad Obregón, Sonora. In both sites, water seems not to have been a problem and both sites are near the border.

There was, however, no turning back and the referendum was slated for this past weekend.  We all now know the results. The brewery project was knocked out!

Don’t think there has not been an outcry as a consequence, particularly from local business organizations in Mexicali, including the Business Coordinating Council (CCE) and the National Employers Confederation (Coparmex), which are screaming foul play by the “leftist” AMLO government.

The immediate reaction from the entrepreneurial community did not take into consideration the local vote, but blamed the whole affair on AMLO. In fact, the word is out that this was an encore of the cancellation of the New Mexico International Airport (NAIM) in Mexico City. Perhaps it is, but as in the case of the NAIM, the brewery cancellation has no turning back, or so it seems.

There’s a lot of talk in the press that the cancellation goes against the North American Free Trade Agreement (NAFTA), which states that all “expropriations” must be paid in full by the government. Nevertheless, the Mexican government did not expropriate the Constellation Brands facility. It has just, according to AMLO, followed the will of the people of Mexicali, denying the company previously approved water usage permits.

AMLO has said that he is willing to meet with all of the management and legal representatives of Constellation Brands in México in order to “explain” what happened (as if it needed explanation), but also to review a compensation agreement that could settle this problem favorably for the company, the government and the good name that Mexico has for giving abode to foreign investment.

At the same time, thus far, two state governors (from Nayarit and Tabasco) have jumped into a new bandwagon to attract the Constellation Brands brewery to their states, promising in advance water galore. There may be other offers in states where water is not a problem, such as Chiapas.

Sure, Mexicali – from a logistics stand point – is a prime location for industries as they can move merchandise quickly into the UNited States. Moving beer from Nayarit or Tabasco, or another water efficient state to the United States will not be so easy, but not impossible.

Yes, it’ll cost more, but the makers of Corona beer – among many other brands of spirits and liquors – will be able to operate in Mexico without problems like the one in Mexicali, an otherwise industrious maquiladora city that welcomes foreign investment but has no liquid for water-intensive industries.

Beyond is the noise and the bunch of Mexico City columnists who claim that “Mexico has shot itself in the foot” with this cancellation vote and will stop foreign investment from coming to Mexico.

But in the end, it was the people of Mexicali, the Cachanillas, who voted no and preferred to salvage the available water for personal, not commercial, use.

Surely, it is foreseeable that once AMLO and Constellation Brands management meet – the date has not been set, but the appointment is made – there will be a win-win solution for the affected company and Mexico’s prestige as a haven for foreign investors will be restored.

But for now, AMLO said that he will respect the vote of the people on this one issue.

 

 

Categories: Finance, Mexico, Opinion, PoliticsTags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

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