Mexico has revoked a US$3.75 billion high-speed rail contract from a Chinese-led consortium after its uncontested bid prompted an outcry from lawmakers, Reuters reported today.
The move came on the eve of a state visit to China next week by Mexican President Enrique Pena Nieto.
Rescinding of the contract by Mexico City came swiftly after protests by opposition politicians over the uncontested bid. Guyanese politicians have had similar concerns over a number of Chinese projects but the PPP/C government has refused to entertain them.
Reuters said that after the contract to build the link was awarded on Monday, opposition politicians accused the government of favouring the group led by China Railway Construction Corp Ltd, the sole bidder.
Mexico’s communications and transport ministry said today it expects to re-run the tender in late November under the same terms, and would keep it open for 6 months so that all interested parties can participate.
“The president wants this project which is so important for Mexico to not be questioned, to have absolute clarity,” Transportation Minister Gerardo Ruiz Esparza said.
“We expect more participation from train makers in the new tender,” he added. China Railway Construction can take part in the new tender and could be eligible for compensation because Mexico’s government withdrew the contract, he said.
A Chinese railway company, China Railway First Group (CRFG) has struck up a favoured relationship with the government here. It was the company identified to construct the now stalled Amaila Falls Hydropower Project and was recently awarded a road construction contract for the East Coast under dubious circumstances. It is unclear whether CRFG is connected with China Railway Construction Corp Ltd which lost the Mexican contract today.
Announcing the now scrapped contract on Monday, Reuters reported that Mexico’s government said the 210-km (130-mile) line to connect Mexico City and the central city of Queretaro would cost 50.82 billion pesos (US$3.74 billion), including the build cost and five years of operation.
The proposal, Reuters said, came with a 20-year, Chinese government-backed credit to cover most of the project’s value, at interest rates below those available even to Mexico’s government. Similarly favourable conditions have also been attached to several projects here which are being undertaken by Chinese companies.
News of the cancellation dragged down Chinese stocks today and is seen as an embarrassment for Pena Nieto ahead of his Chinese trip. Reuters said that he is due to unveil a joint investment fund with China, which has so far invested a tiny fraction in Mexico of the billions of dollars it has disbursed in Latin America.
Reuters said that China’s CSR Corp Limited and China Railway Construction, both involved in the bid, could not immediately be reached for comment by Reuters. However, it said that Chinese financial news magazine Caixin, reported that both companies said they were unaware and surprised when contacted for confirmation.
Mexico’s transport ministry, which has defended the bid process, said it was offering a new auction so more companies could make offers, to “strengthen the absolute clarity, legitimacy and transparency” of the process, Reuters reported.
Opposition lawmakers yesterday questioned Communications and Transport Minister Gerardo Ruiz Esparza over the deal, accusing the government of providing information to help the Chinese-led consortium and its Mexican allies.
Reuters said that senators asked how 16 companies had pulled out of the bidding on such a prestigious project. Javier Corral of the centre-right National Action Party accused the government of sharing information with the winning team ahead of time. Ruiz Esparza denied the accusations.
Similar concerns have been raised here about senior officials sharing information with Chinese bidders.
Germany’s Siemens and Canada’s Bombardier were among the companies which had expressed an interest in the project.
Siemens’ Mexico rail chief told Reuters last month that the company, along with Bombardier and France’s Alstom PA, had asked for more time to prepare a bid, a request he said was denied by the transport ministry.
An Alstom spokeswoman said today the group would consider the tender if it is re-launched, but would need six to eight months to draw up an offer.
Reuters said that Pena Nieto’s Institutional Revolutionary Party (PRI) was frequently accused of fostering crony capitalism when it ruled Mexico for most of the 20th century.
