May 24, 2019 / 5:43 PM / 3 months ago

Steelmaker ArcelorMittal frets over future of Mexican tax benefits

MEXICO CITY, May 24 (Reuters) - Tax incentives in Mexico designed to lure investment to poorer areas should be maintained, the head of ArcelorMittal’s Mexican unit said in an interview, despite the new president’s suggestion that the policy should not be renewed.

ArcelorMittal’s chief executive in Mexico Victor Cairo said late on Thursday that the firm’s pledge to invest $1 billion over three years in its operations in the Pacific coast port of Lazaro Cardenas would be maintained for now.

He declined to speculate on what might happen to the project, which is nearly 70% completed, if the Special Economic Zone tax breaks were eliminated.

ArcelorMittal’s project includes the construction of a hot roll mill, a blast furnace modernization and mining investment adjustments to better supply the automotive and construction industries among others, said Cairo.

The Luxembourg-based company, the world’s largest steelmaker, is responsible for about 6% of global steel output.

Mexican President Andres Manuel Lopez Obrador has threatened to stop a 10-year extension of the tax breaks, arguing last month that they have not worked.

“The fear is that we made the commitment based on the law and we believe that it is a very good thing for the south,” said Cairo, referring to Mexico’s historically poorer southern states.

Cairo said he believes projects like ArcelorMittal’s that were undertaken with the tax breaks in mind should continue to get tax relief.

The executive said the steelmaker expects to produce about 4 million tonnes of liquid steel in Mexico this year and another 5.3 million tonnes in 2020.

Reporting by Sharay Angulo; Writing by David Alire Garcia; Editing by Andrea Ricci

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