Mexico defends decision to scrap US$3.75 billion Chinese train deal

Mexican President Enrique Pena Nieto delivers a speech at the National Palace, in Mexico City, on Oct 6, 2014. Mexico's government defended on Friday its abrupt decision to scrap a bullet train deal it had just awarded to a Chinese-led consortiu
Mexican President Enrique Pena Nieto delivers a speech at the National Palace, in Mexico City, on Oct 6, 2014. Mexico's government defended on Friday its abrupt decision to scrap a bullet train deal it had just awarded to a Chinese-led consortium after concerns were raised about the bidding process. Pena Nieto called off the US$3.75 billion (S$4.8 billion) tender late on Thursday. -- PHOTO: AFP

MEXICO CITY (AFP) - Mexico's government defended on Friday its abrupt decision to scrap a bullet train deal it had just awarded to a Chinese-led consortium after concerns were raised about the bidding process.

President Enrique Pena Nieto called off the US$3.75 billion (S$4.8 billion) tender late on Thursday, just three days after the group headed by the China Railway Construction won the contract to build Latin America's first high-speed rail.

The Chinese-Mexican consortium faced no opposition when it was picked Monday to build the 210km line between Mexico City and the central manufacturing hub of Queretaro.

Companies had been given just 60 days to present an offer even though some had asked for more time.

Sixteen firms had initially shown interest - including industry giants Mitsubishi of Japan, Alstom of France, Bombardier of Canada and Siemens of Germany - but ultimately stayed out of the contest.

Transport Minister Gerardo Ruiz Esparza said the government would likely reopen the bidding process in late November and give companies six months to submit an offer.

"Hopefully, there will be more participants this time," Ruiz Esparza told Radio Formula.

The newspaper Reforma reported that the Mexican companies are close to Pena Nieto's Institutional Revolutionary Party (PRI), while senators voiced concerns about the way the contract was awarded during a hearing with Ruiz Esparza on Thursday.

Senator Javier Lozano told the minister that the conservative National Action Party had "serious doubts, questions, worries about the legality and transparency of this bidding process".

The transport minister told local media everything had taken place within the law but that the government decided to restart the bidding to avoid "any doubts".

"The essential thing for such a beneficial project is to not give the impression that there was favoritism," Ruiz Esparza said.

Pena Nieto will likely have to personally explain his decision to Chinese President Xi Jinping when he flies to China for a series of meetings on Sunday.

The Mexican leader will attend an Asia-Pacific Economic Cooperation (Apec) summit in Beijing before a two-day state visit in China in his latest effort to forge closer ties with the Asian powerhouse.

Pena Nieto already had to shorten his trip, which includes a G20 summit in Australia, due to a growing human rights scandal over the disappearance of 43 college students who were attacked by gang-linked police.

"He will probably tell the Chinese that he wants to rules of the game to be transparent and he will surely explain the domestic political situation," Adolfo Laborde, foreign relations expert at the Monterrey Technology Institute, told AFP.

Prior to scrapping the deal, the government had expected construction to start in December and operations to begin in 2017. Ruiz Esparza said Pena Nieto wants the train to start running before his single six-year term ends December 2018.

The high-speed rail project is part of Pena Nieto's plan to bring back passenger trains to Latin America's second-biggest economy, which all but disappeared after the sector was privatized in the 1990s.

The project aims to carry around 25,000 passengers per day at speeds of up to 300km per hour, reducing the commute between Mexico City and Queretaro from two-and-a-half hours to 58 minutes.