Beijing seen as lifeline to Latin American economies

Chinese investments may have recently suffered setbacks in Central and South America but they still provide a much-needed lifeline to the troubled economies in the region, say analysts.

The Mexican government this month cancelled a US$4.4 billion high-speed-rail contract it had awarded only a few days earlier to a consortium of Chinese, French and Mexican firms.

"Both governments tried hard to push this project to showcase their relationship, but did not improve dialogue with political parties, the public sector, private organisations and academics. As a result of an insufficiently prepared rush, the project was cancelled," said Enrique Dussel Peters, a professor at the Graduate School of Economics at the National Autonomous University of Mexico.

Some Mexican companies in the consortium had connections with President Enrique Peña Nieto, so extensive due diligence should have been conducted to prove there was no conflict of interest, said Dwight Dyer, Mexico and the Americas senior analyst at Control Risks, a British consultancy. "This incident offers foreign investors a much-needed signal regarding transparency and anti-corruption measures."

Some Mexican firms in the consortium benefited from US$652 million worth of contracts while Peña Nieto was governor of Mexico state from 2005 to 2011, the website of Mexican journalist Carmen Aristegui alleged.

"The Peña Nieto administration's unexpected backtracking on the high-speed rail reflects the intense scrutiny from international companies and markets that any large infrastructure project in Mexico is likely to receive. The [Mexican] economic reforms in the past two years were accompanied by promises of greater transparency. However, anti-corruption reforms were left waiting [in the wings]," said Dyer.