Incoming Mexican president Andrés Manuel López Obrador said he plans to scrap a $13bn Norman Foster-designed Mexico City airport after a “people’s poll” deemed it undesirable, stirring investor unease and sending the peso sharply lower.

The president-elect said on Monday he had decided to “obey the mandate of the citizens” by abandoning the project on a dried lake bed in Texcoco, where construction began in 2015. Mexico will instead build two runways at a nearby military airport and invest to improve the existing Mexico City airport, which is operating at full capacity, and expand operations at an airport in the city of Toluca.

The decision raised business concerns that the new administration, which will be sworn in on December 1, may not respect long-term contracts. The peso was by far the biggest loser among major currencies trading against the US dollar on Monday, down 3.5 per cent at 20.04 per dollar, the weakest level since early July.

Mexican equities also fell, with the IPC stock index down over 4 per cent.

Mr López Obrador called the citizen’s vote on the airport “wise” and declared the decision a victory for birds and environmentalists, who had panned the giant project as ecocide. He also asserted that the new plan would save taxpayers 100 billion pesos ($5bn).

Gabriela Siller, head of economic analysis at Mexico’s Banco Base, said the cancellation could raise the perception of sovereign risk, limit fixed investment in Mexico and reduce long-term economic growth potential.

A 30-year bond issued by the Mexico City Airport Trust that are due in 2047 fell as low as 79 cents on the dollar, pushing its yield up to more than 7 per cent. It had traded as high as 92 cents on the dollar as recently as the end of June.

The vast airport project — covering 5,000 hectares — already has a partially-built air traffic control tower. Some 500,000 tonnes of concrete and 100,000 tonnes of steel have been sunk into the base of the X-shaped terminal building in Texcoco, where structures designed to hold up the roof were already being erected. The site contemplated three runways, each 5km long.

Enrique Calderón, head of the Arturo Rosenblueth Foundation which was in charge of counting the ballots from the four-day unofficial poll, said a total of 1.07m people voted in the poll — about 1 per cent of the electorate.

Our clients say they have an enormous appetite to invest in Mexico, but they need the legal certainty to do so

The International Civil Aviation Organization has called for a full technical study given concerns that simultaneous operations at Santa Lucía and the current Mexico City airport could lead to collisions or the need for flights to be staggered so much that traffic volumes would plunge.

Mr López Obrador insisted Monday that the Santa Lucia alternative was “viable” from a technical perspective and that contractors can expect the “same volume” of work at Santa Lucia as they have been engaged in at the Texcoco location.

The incoming administration maintains that contracts will be respected but legal experts said scrapping Texcoco could constitute a bond default, and anticipated legal challenges.

Juan Francisco Torres-Landa, managing partner at global law firm Hogan Lovells Mexico, expects repercussions from the airport decision.

“Our clients say they have an enormous appetite to invest in Mexico, but they need the legal certainty to do so,” said Mr Torres-Landa. “Mexico is one possible destination for investments — there are many fields where these investors can play.”

Mexico City's new airport, which President Andrés Manuel López Obrador plans to scrap, is already about a third completed © AP

Critics said the new president would regret scrapping Texcoco. “The decision by @lopezobrador on the new airport will be remembered as one of the worst stupidities by a president in contemporary economic history. I hope I am wrong,” tweeted Enrique Cárdenas, a professor at the Iberoamericana University in Puebla.

Gustavo de Hoyos, head of Coparmex, a business confederation, said investors should blame “every peso” of losses following the airport cancellation on Mr López Obrador, saying the decision “will define his presidency”.

Cancellation of the project has also stoked concerns that local pension returns will suffer. Mexican pension funds have supplied just under 10 per cent of the financing of the current project.

Pension fund association Amafore said Monday that pensioners would be unaffected, and that the airport financing represented just 0.4 per cent of the savings overseen by the Afores pension network. The Afores hold bonds and bought into an investment trust called Fibra-E that is backed by passenger fees from existing or future airports.

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