Thursday, May 14, 2015

Today's Mexico City Headlines: Road to ruin?

We all know more about the Spanish highway builder OHL than we ever thought we would.
    We know, for example, that its affiliate OHL México built the State of Mexico segment of the famous second deck on the Mexico City area’s Anillo Periférico freeway and on up toward Querétaro for 22 kilometers.
    We know that it has the concession to collect the tolls on that stretch until 2038, and that it had recently negotiated a price rise so it could collect more.
    But we also know that state authorities announced a freeze on toll rates after clandestine recordings surfaced last week of OHL executives talking about overcharging the state government and comping its transportation secretary at a luxury hotel on the Riviera Maya. The freeze, alas, comes after the fact; a 30% increase was put into effect in January.
    And we know that the first head rolled on Monday, when the resignation of one of OHL Mexico’’s top executives, Pablo Wallentin, was announced after an emergency meeting of the board of directors.
    Now we know something else, courtesy of La Jornada’s lead front-page headline, “The CNBV is investigating the Mexican subsidiary of the OHL consortium.” 
    This's big because the previously announced investigations are either internal (by the OHL parent company), controlled by OHL (by hiring an outside firm to look for wrongdoing), or limited (the State of Mexico said it would audit OHL’s compliance with its contract).
    But the CNBV — the National Banking and Securities Commission — is a Mexican federal regulator with some teeth. Much of the Jornada story is picked up from reports by Bloomberg and Reuters, citing unnamed sources, so there’s no CNBV confirmation or comment.
    If the investigation is indeed already under way, it would focus, at least at first, on  the drastic plunge in OHL México’s share price on the Mexican stock exchange, known as the BMV, after the recordings were made public. The company has an obligation to disclose to shareholders any information that could negatively affect stock value. Did it?
    Of course, there could be more to look into. For example, have OHL México’s earnings been predicated on contracts obtained through shady dealings with state officials? Were favors bestowed on the state transportation secretary in exchange for toll hikes?
    OHL says that its practices are clean, that the recordings were doctored and that it would welcome a CNBV probe if there indeed is one.
    That could very well be. But another thing we know without anybody having to tell us is that this mess does no favors for President Peña Nieto, who has been struggling for a year now to overcome an image of running a country where corruption reigns. What's more, most of the planning and construction of the State of Mexico second-deck project, officially the Bicentennial Elevated Viaduct, took place during his term as governor of that state.   

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