Voters in a Mexican border city have rejected the construction of a massive, US-owned brewery in an arid region rife with water shortages – an improbable victory for a collective of farmers and activists over a deep-pocketed company backed by state and local officials.

In a weekend plebiscite in the city of Mexicali, 76.1% of voters cast ballots against the $1.4bn brewery, being built by Constellation Brands to brew beer for export – including Corona, Modelo and Pacifico.

“There’s been an intense campaign [against the brewery] by a resistance movement for two years … protesting in the streets and going to the courts to hold a plebiscite,” said Daniel Solorio, a lawyer who has worked with the opposition.

“It’s surprising the president called a plebiscite on such short notice,” he said, “but we’ve been demanding a vote for two years.”

Alfonso Cortez Lara, water expert at the College of the Northern Border, said the brewery was projected to use more water than all the industrial users in Mexicali combined.

“We’re talking about 25% of our [water] reserves,” he said of the brewery’s proposed peak water use.

Federal officials said on Monday the plant would lose its water permits and the government would seek to negotiate with the company.

Critics complained that only 3.5% of people in Mexicali participated in the vote, which was called barely two weeks earlier by President Andrés Manuel López Obrador.

It was the latest of a string of controversial projects the populist leader has put to sudden plebiscites, which critics contend are rigged to induce his preferred result.

The vote – carried out amid the coronavirus pandemic – came at a tricky time for Mexico, where the economy has stagnated and the peso has plunged.

International investors appear spooked by López Obrador’s willingness to call snap votes on projects already under construction, such as a new airport in Mexico City.

“The consultation on #ConstellationBrands in Mexicali is a strong blow to investor confidence on the eve of an economic crisis,” the business chamber Coparmex tweeted on Sunday.

Constellation Brands shares fell by more than 10% on news of the plebiscite.

Cortez said the issue would probably be taken to court under an investor protection provision in Mexico’s free trade deal with the United States and Canada.

Mexico is the world’s biggest beer exporter, but the industry has become the focus for resentment in the arid north where breweries are perceived as using scarce water resources to slake US thirst at a time when climate change is exacerbating droughts in the region.

Earlier this year, Mexico’s national human rights commission warned that the Mexicali brewery risked violating the right to water and highlighted irregularities in the permitting process.

López Obrador said the consultation was necessary because the company and local authorities “didn’t take the people into account”.

“We’re not against foreign investment,” he said, “but we also have to take the people’s opinion into account and take care of our natural resources.”