Mexico’s President Enrique Pena Nieto
© Reuters Mexico’s President Enrique Pena Nieto
Mexico has abruptly cancelled a contract worth $3.75 billion (58.9 billion pesos) with a Chinese-led rail consortium, just two days after it was awarded. The project to construct the country's first bullet train faced opposition from local lawmakers.

The China Railway Construction Corp. and CSR Corp. won the contract Monday, which set off steam amongst opposition politicians, who claimed the tender by the Chinese company, the sole bidder, lacked transparency and legitimacy. A new auction will be held and will include more bidders.


Comment: As noted on Bloomberg:
The bidding had come under scrutiny by the opposition National Action Party, with lawmakers accusing the government of favoring the Chinese proposal. The PAN said the sole bid was too expensive and that insufficient time was given to other companies to present their projects.

In canceling the contract, Pena Nieto is seeking to portray his government as more transparent after police involvement in the disappearance of 43 college students in western Mexico sparked international concern over corruption, said Jorge Chabat, a political and security analyst.

Pena Nieto "doesn't want Mexico to be associated again with any irregularity," said Chabat, a professor at the Center for Economic Research and Teaching, a Mexico City-based university. Redoing the process "could create an image of litte certainty for companies. But the president is now more concerned about public opinion."

Communications and Transportation Minister Gerardo Ruiz Esparza had said earlier the construction cost of $3.2 billion is less than originally budgeted and Mexico had given companies since last November to prepare, while denying any favoritism.

The Chinese-led group included Mexican firms that are linked to the brother of former President Carlos Salinas de Gortari.


Comment: President Carlos Salinas de Gortari is also from the PRI.


The proposed 210-kilometer (130-mile) railway would link Mexico City with the central manufacturing hub of Queretaro.

Esparza told the Televisa network the country's President, Enrique Pena Nieto made a last minute decision to back out of the deal signed on November 3 and start the bidding process over. The Chinese consortium was the only one to put forward a proposal by the October 15 deadline, after Mitsubishi of Japan, Alstom of France, Bombardier of Canada and Siemens of Germany all refrained from bidding.

China also offered to finance 85 percent of the project from loans from the Export-Import Bank of China.

Nieto is due to visit China from next week to participate in the Asia-Pacific Economic Cooperation (APEC) summit, as well as a two-day official state visit to develop ties between Latin America's second biggest economy and the world's second largest economy.