Mexico Derails China-Led High-Speed Train Deal

Mexico Derails China-Led High-Speed Train Deal

After a consortium led by state-owned China Railway Construction won an uncontested contract to build Mexico’s first bullet train on Monday, Mexican President Enrique Peña Nieto abruptly cancelled the deal. At the Wall Street Journal, José de Córdoba reports on the cancelled US$3.7 billion deal:

In an interview on a Mexican news show, Communications and Transport Minister Gerardo Ruiz Esparza said Mexican President Enrique Peña Nieto decided to cancel the contract, which was awarded to a group led by China Railway Construction Corp. and CSR Corp. , along with several Mexican construction firms.

Mr. Ruiz Esparza said the decision to cancel the contract was due to “doubts and concerns” that were raised about the bidding process for plans to build a high-speed train between City and the city of Queretaro.

China Railway and were the only companies to bid for the railway after the government rejected requests from several potential bidders for additional time to prepare offers. Companies that looked at the project but didn’t bid included Germany’s Siemens AG , France’s Alstom and Canada’s Bombardier Inc.

[…] Mr. Ruiz Esparza said the contract would be opened for bidding again in the near future and this time, interested companies would be given more time to present offers. He also said on the news program that Mr. Peña Nieto had made the decision “just a few minutes ago.”

This comes just ahead of President Peña Nieto’s scheduled trip to Beijing to attend the APEC summit of world leaders; the Guardian reports that “Mexico has sought to forge closer business ties with China but the revocation of the project is an embarrassment ahead of Peña Nieto’s planned visit.”

A report from Quartz further elaborates on the “doubts and concerns” the bidding process raised among the Mexican president’s opposition:

The opposition National Action Party in Mexico found several problems with this situation. Other potential bidders’ requests for more time to put together an offer were denied, the party said. It alleged that “a group close to the current president looks to benefit” from the project, because Constructora Teya has ties to a company that rented planes to Mexican president Enrique Peña Nieto’s election campaign. [Source]

A separate, earlier report from Quartz describes China’s drive to become a major global player in high-speed rail:

Once a massive importer of rail technology, China now aims to be a world leader in high speed rail—from a proposed bullet train that reaches the United States via the Bering Strait to establishing a trans-Asia railway connecting Laos, Cambodia, Thailand, Malaysia, and Singapore. China is or is in talks to build or sell high speed rail in at least 20 countries beyond its own borders, and that doesn’t include China CNR Corporation’s forthcoming pitch to sell its to the US state of California.

Compared to longstanding high speed rail exporters Japan and Germany, Chinese rail is cheaper—an average of between $17-21 million per km in infrastructure costs, compared to $25-39 million per km, according to estimates by the World Bank (pdf, p.7). (Of course, much of China’s know comes from Japanese and German companies that trained Chinese engineers.) The upcomingmerger of China’s two largest train makers, China Northern Locomotive & Rolling Stock Industry Group Corp and CSR Group, could make the country’s cost advantage even more substantial. […] [Source]

On Twitter, former Mexican Ambassador to China Jorge Guajardo comments:

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