Mexico finalized plans to take control of a port and quarry owned by Vulcan Materials Co. on its Caribbean coast, deepening tensions days before the nation’s president leaves office.

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AMLO seizes U.S.-owned port in final week as Mexico's leader Back to video

President Andres Manuel Lopez Obrador’s administration declared the land south of the resort cities of Cancun and Playa del Carmen a natural protected area, according to a filing in the federal gazette published hours after U.S. lawmakers sought to dissuade such a move.

The move prevents the Alabama-based construction company from extracting limestone at a site it has been developing for decades. Its shares fell 1.2 per cent to US$249.46 in New York on Tuesday morning.

“The expropriation of our company owned land and port is yet another escalation and is a new violation of Mexico’s commitments under North American trade agreements,” Vulcan said in a statement. “This unlawful measure will have a chilling and long-term effect on US-Mexico trade and investment relations.”

The company previously said that the López Obrador government’s actions are illegal, and that it would add the most recent measures to an ongoing arbitration case.

This week’s expropriation marks another move against business interests by Lopez Obrador, a staunch nationalist who finishes his single six-year term this month. A new congress was sworn in Sept. 1 after June congressional elections gave the president’s party large majorities in both houses. It has since approved a judicial overhaul that’s drawn criticism from international investors.

President-elect Claudia Sheinbaum, who takes office Oct. 1, hasn’t commented publicly on the Vulcan issue since her landslide victory. But a year ago she said she hoped the company would accept the government’s offer to purchase the land.

Bloomberg News reported in July that AMLO, as the outgoing president is known, was moving toward the protection designation. Last year, Vulcan sought the Biden administration’s intervention against what it saw as the threat of a government takeover of the Mayan Riviera property. It said a $360 million valuation deeply undervalued the assets.

On Monday, a bipartisan group of U.S. senators proposed legislation to pressure AMLO to back down from the expropriation plan.

Vulcan has been in litigation with Mexico since 2018 under the North American Free Trade Agreement, known as Nafta. The pact was replaced with the US-Mexico-Canada Agreement during the Trump administration.

AMLO had previously alleged environmental damage and sent the Mexican marines to occupy the land. Vulcan’s chief executive officer defended its environmental record, citing international awards and its reforestation efforts.

Vulcan isn’t the only foreign company that has sought legal recourse after a government intervention under AMLO. In December, Mexico took control of operations at a hydrogen processing plant owned by French industrial gas manufacturer Air Liquide. Last year, AMLO announced plans to buy US$6 billion worth of energy assets from Iberdrola SA after the Spanish company faced political hostility from Mexico that affected its permits and supply.

AMLO also ordered the cancellation of projects including an airport and a beer plant during his term.

U.S. Ambassador to Mexico Ken Salazar has warned that companies may lose confidence in Mexico as an investment destination as a result of the judicial reform pushed through Congress this month. The change removes a check on government power by making federal judges democratically elected, including at the Supreme Court.

—With assistance from Maya Averbuch.

Bloomberg.com