22 August 2019
China Railway Construction Corp., leader of the consortium that won the rail contract, vows to use legal means to protect its interests. Photo: Bloomberg
China Railway Construction Corp., leader of the consortium that won the rail contract, vows to use legal means to protect its interests. Photo: Bloomberg

China surprised after Mexico cancels US$3.75 bln rail deal

A company connected to the US$3.75 billion high-speed rail contract that Mexico abruptly canceled last week built and owns the private home of President Enrique Pena Nieto, Associated Press reported, citing a report by a leading Mexican journalist.

China’s top economic planner, the National Development and Reform Commission (NDRC), expressed surprise at Mexico’s decision to cancel the contract, which was won by a group led by China Railway Construction Corp. Ltd. (CRCC, 601186.CN). The NDRC stressed that Mexico canceled the contract “because of domestic factors”, the official Xinhua News Agency reported.

The CRCC on Sunday said it is “extremely shocked” by Mexico’s decision to withdraw the deal, adding that it would resort to legal means to protect its interests if necessary.

The US$7 million home on a 15,220-square-foot property in Mexico City’s most exclusive neighborhood was built and is owned by Ingenieria Inmobiliaria del Centro, a company belonging to Grupo Higa, AP said, citing a report published Sunday by Aristegui Noticias, the website of journalist Carmen Aristegui.

Constructora Teya, another Grupo Higa company, was part of the Chinese-led consortium that won the rail contract, a project that Pena Nieto showcased as part of his push to modernize the country’s transportation system.

Opposition lawmakers criticized the rapid approval process of the rail contract that produced only one bidder as smacking of insider favors long associated with Pena Nieto’s political party, the institutional Revolutionary Party, or PRI.

The winning consortium included CRCC and the Mexican firms Constructora y Edificadora GIA, GHP Infraestructura Mexicana, Prodemex and Constructora Teya.

A government statement released late Thursday said the bidding process will be reopened to give others a chance at the project.

Mexico’s Communications and Transport Ministry, which has defended the bidding process, said on Friday it expects to re-run the tender in late November under the same terms, and would keep it open for six months to enable all interested parties to participate, Reuters reported.

An NDRC spokesman said Mexico’s move  “had nothing to do with the Chinese enterprise, and the Chinese government hopes that the case could be settled properly as soon as possible”.

“It is surprising to hear Mexico decided to scrap the rail deal as the Chinese enterprise has been strictly following the public bidding procedures and requirements, and the bidding content complies with the requirements of the Mexican government,” he added.

“The Chinese government encourages enterprises to participate in infrastructure construction in Mexico in a mutually beneficial way, and hopes the Mexican government could create a fair competition environment for these enterprises.”

The decision was made ahead of the state visit to Beijing by Pena Nieto, who will also be attending the Nov. 10-11 Asia Pacific Economic Cooperation summit.

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

According to Aristegui’s article, the modern, all-white house with a lighting system to cast it in a variety of colors has never been declared by Pena Nieto in his disclosure statements. It says the disclosures of his wife, former actress Angelica Rivera, are confidential. The property is connected to a home owned by Rivera.

The article did not specify what laws if any are broken by the president using a house registered under another name.

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