Mexico president flags water-scarcity of northern state eyed for Tesla plant

MEXICO CITY (Reuters) -Mexico’s president said on Monday the northern Mexican state of Nuevo Leon, considered the front-runner to land a major investment from Tesla Inc, struggles with a lack of water and touted the benefits of the poorer southern region where he has fought to boost development.

The comments come amid fears from some investors and analysts that Mexico’s geographic advantages as a nearshoring destination for businesses looking to sell into the United States are somewhat dampened by the heavy-handed influence of the federal government.

The state of Nuevo Leon at the U.S. border had emerged as the top contender in Tesla’s hunt for a site to open its first plant in Mexico, yet President Andres Manuel Lopez Obrador said the electric car producer has not yet made a final decision and he would speak with company executives about the location.

“There are favorable conditions in Nuevo Leon. They have a skilled workforce, they have engineers, it’s very close to the border,” he told a news conference. “But the lack of water?”

Lopez Obrador said he would emphasize to Tesla the need for careful planning around water, electricity and other services, noting certain northern zones ban water extraction while the southeast holds 70% of Mexico’s water.

“There’s water, there’s gas, there’s electricity … that’s part of what we want to make known,” said the president, who is slated to speak directly with Tesla Chief Executive Elon Musk.

Lopez Obrador has made it a priority to draw investment to southern Mexico, which has lacked the level of industrialization that has flourished along Mexico’s northern border.

His administration scored a victory last year when brewery Constellation Brands opted to build in the southeastern state of Veracruz, after a partly-built project in the arid northern city of Mexicali was scrapped following Lopez Obrador’s concerns over water scarcity.

Following Lopez Obrador’s remarks on Monday, Nuevo Leon Economy Minister Ivan Rivas said water access had not been an issue for companies or held back investment, according to Mexican outlet Milenio.

(Reporting by Raul Cortes, Kylie Madry and Daina Beth Solomon; Editing by Stephen Eisenhammer, Marguerita Choy and Chris Reese)