Mexico derails Chinese bullet train deal days after contract agreed
Move comes ahead of now-curtailed visit to Beijing by nation's president
Mexico yesterday cancelled a US$3.75 billion rail contract awarded to a Chinese-led consortium amid an outcry over the tender process, casting a shadow over President Enrique Pena Nieto's state visit to China next week.
Mexican Transport Minister Gerardo Ruiz Esparza yesterday announced that Pena Nieto had decided to cancel the high-speed-rail contract won by a consortium led by two Chinese firms, China Railway Construction Corp (CRCC) and train maker CSR Corp.
A statement by Mexico's Ministry of Communications and Transportation said the president instructed the Ministry of Communications and Transportation to initiate a new tender and restart the bidding process at the end of the month "to gain absolute clarity, legitimacy and transparency".
It also said the bidding process had to be started all over again "because of the doubts and concerns that have arisen among the public". The new tender will be open for six months.
The Chinese commerce ministry declined to comment on the matter.
The Mexican government had awarded the contract on Monday to a consortium comprising the two Chinese firms and four Mexican partners after other companies opted out of the tender, leaving the Chinese-led consortium as the only bidder to build and equip the 210km high-speed line linking the capital, Mexico City, and Queretaro.
A Siemens executive told Reuters that the German company, along with France's Alstom and Canada's Bombardier, had asked for more time to bid but the request was rejected by the transport ministry. Some Mexican lawmakers expressed doubts about the tender process as there was only one bidder.
Shortly before the cancellation was announced, Mexico said Pena Nieto would leave for China only on Sunday, rather than yesterday, as planned. He faces pressure in the wake of the disappearance of 43 students, believed abducted on the orders of a drug cartel.
The cancellation of the contract dragged down CRCC's share price by 5.7 per cent to HK$8.02. Shares of infrastructure firms, led by railway companies, had been rallying in anticipation of China winning overseas contracts.
"If it wasn't right to have only one bidder, the Mexican government should have restarted the bidding right away rather than cancelling it after the contract was awarded," said Lawrence Li, a transport analyst at investment bank UOB Kay Hian.
He added that there was one big concern about the project. "The 1,210-day construction period for a high-speed-rail line with a designated speed of 300 km/h is quite short," said Li. However, he said the geological conditions in Mexico were less complicated than in China, with a need for fewer tunnels and viaducts.
Zhao Jian , a professor at Beijing Jiaotong University, said the withdrawal was not necessarily bad news for CRCC stock price as the quotation was too low.
