High-speed train deal in Mexico goes off the rails

Bidding to reopen after contract snatched from Chinese-led group

Mexico has revoked a contract for a $3.75 billion high-speed passenger rail link with a Chinese-led consortium after its uncontested bid prompted an outcry from lawmakers, souring a state visit to China next week by President Enrique Pena Nieto.

After the contract was awarded on Monday, opposition politicians accused the government of favoring the group led by China Railway Construction Corp Ltd, the sole bidder. Mexico's Transport and Communications Ministry said late on Thursday it would now solicit new bids for the job.

"The president is sensitive to the fact that there should be no doubts about a project this important and of such benefit for society, "the ministry said in its statement.

Since Pena Nieto took office in late 2012, he has tried to forge closer ties with China, after years of manufacturing rivalry between the two nations seeking to supply the US market.

Announcing the contract on Monday, the Mexican government said the 210-km line connecting Mexico City and the central city of Queretaro would cost 50.82billion pesos ($3.74 billion) to build and operate for five years.

The proposal came with a 20-year, Chinese government-backed credit to cover most of the project's value, at interest rates below those available to Mexico's government.

News of the cancelation, which dragged down Chinese stocks on Friday, is an embarrassment for Pena Nieto ahead of his trip to China, where he is due to unveil a joint investment fund with China, which has so far invested in Mexico only a tiny fraction of the billions of dollars it has spent in Latin America.

The fund could be worth up to $5 billion, officials say.

China's CSR Corp Ltd and China Railway Construction, both involved in the bid, could not immediately be reached for comment. The financial news magazine Cai xin, however, reported that both companies said they were unaware and surprised when contacted for confirmation.

After the news was released, shares in China Railway Construction shed nearly 5 percent, their biggest drop since June 2013.

Mexico's Transport and Communications Ministry, which has defended the bidding process, said it was reopening the bidding so more companies could make offers, to "strengthen the absolute clarity, legitimacy and transparency "of the auction.

It did not give a new deadline.

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On Thursday, opposition lawmakers had questioned Transport and Communications Minister Gerardo Ruiz Esparza over the deal, accusing the government of providing information to help the Chinese-led consortium and its Mexi canallies.

Senators asked how 16 companies had pulled out of the bidding on such a prestigious project and Javier Corral of the center-right National Action Party accused the government of sharing information with the winning team ahead of time.

Ruiz Esparza denied the accusations.

Germany's Siemens and Canada's Bombardier were among the companies to express an interest in the project, which is meant to move 27,000 passengers daily from Queretaro at speeds of up to 300 kilometers per hour.

Pena Nieto's Institutional Revolutionary Party was frequently accused of fostering crony capitalism when it ruled Mexico for most of the 20th century. Much economic power is still concentrated in the hand sofa few families in Mexico.

China Railway Construction Corp Ltd told China Daily on Friday afternoon that it had not recieved any official notice of the contract's cancelation.

Reuters - Xinhua - China Daily