Mexico's Lopez Obrador says beer production should be stopped

President Andres Manuel Lopez Obrador said on Monday that Mexico, the world's largest beer exporter, should stop making the drink in the north of the country, as the region faces severe water shortages.

The people in Monterrey, the country's industrial heartland in which beermakers like Heineken NV have facilities, have suffered from water scarcity for months as dams emptied out. Lopez Obrador said the government will support companies that want to produce beer in the south or southeast.

This is not to say that we won't produce any more beer, it's to say that we won't produce beer in the north, that's over, Lopez Obrador said at a daily press conference. If they want to keep producing beer, increasing production, then all the support is for the south or southeast. Alongside Heineken, the Mexican beer giant Grupo Modelo, controlled by AB InBev, the world's largest brewer, has facilities in the north. Lopez Obrador cited the case of Constellation Brands as an example of what policy for one of Mexico's main industries should look like. The company planned to set up a beer plant in the border city of Mexicali, but in 2020 Lopez Obrador ordered the project stopped due to water issues after a consultation with local citizens.

The company said it would build in the southeastern state of Veracruz. The company still hasn't built anything on the site, nine months after that announcement, El Financiero newspaper reported last week.

In late July, Heineken offered to give up 20% of the rights it holds to water in Monterrey, and to donate a well while the city deals with the crisis. Lopez Obrador had earlier called for beer companies to help out.

The companies produce household names in the beer industry. Grupo Modelo owns the brands of Corona, Modelo Especial and Pacifico, amongst others, while Heineken produces the brands Dos Equis, Tecate and Bohemia. Beer imports make up close to 18% of all beer consumed in the US, according to the Beer Institute, which works with the US Department of Commerce to track beer volumes in the US.

Commerce Department figures show that Mexico provided 76% of the beer imported by the US last year, according to Commerce Department figures cited by the Beer Institute.

Lopez Obrador, known as AMLO, said that you can't give permits in places where there is no water. We are going to intervene and that is what the state is for. Heineken, Grupo Modelo and Constellation rands didn't respond immediately to requests for comment. Mexico's presidency didn't respond to a comment request seeking to expand on Lopez Obrador's remarks.

The pandemic hasn't snared supply of beer, but demand has gone up in Mexico with beer sellers running out of popular bottles. From late May to early June, the price of Victoria and Corona beers, both made by Grupo Modelo, went up 24%.

Heineken Mexico said in June that it would invest 1.8 billion pes in a can-making plant in Meoqui, Chihuahua near the US-Mexico border. It is not clear whether Lopez Obrador will affect those plans.

The Earnings of US Consumer Giants are not affected by the stagflation.