China Railway Construction Corp (CRCC) remains likely to secure the contract to build a $3.75 billion Mexican high-speed train system, according to sources with knowledge of the bidding, despite CRCC’s original winning bid having been revoked when it became embroiled in a Mexican political scandal.
Mexico is expected to unveil the fresh bid terms for the train project linking Mexico City with the wealthy industrial city of Queretaro. The project is one of Mexican President Enrique Pena Nieto’s flagship infrastructure investments.
People close to the Chinese rail giant and familiar with rival bids say that CRCC is still likely to win, given its broad financing plan, cheap high-speed rail technology and key political support in Mexico.
Both Mexico and China have stressed the importance of the project, which would produce Latin America’s first high-speed trains and also showcase China’s expertise after it built the world's largest high-speed rail network at home in less than 10 years.
After 16 firms, including Siemens, Bombardier and Mitsubishi pulled out of the original tender, leaving a consortium led by state-controlled CRCC as the de facto winner, it led to some awkward questions being asked.
"The process was compromised from the outset, that's without question," said an anonymous person on the Chinese side of the original bid. The source said the tender favoured the Chinese.
An executive from a major European train manufacturer that pulled out from the earlier tender said the Chinese bid's financing made it highly competitive. He added that his company could only finance building the trains, but not the tracks, stations and other infrastructure like the Chinese.
The Mexican government denies that the tender process was designed to benefit the Chinese, but equally has welcomed the decision by CRCC to bid again.
Mexico’s Communications and Transport Minister Gerardo Ruiz Esparza told lawmakers in December 2014 that none of the Mexican firms in the original consortium will take part in the new tender. It remains to be seen with which companies CRCC will now partner.
CRCC recently said that it is confident of winning. In the last tender, state-backed lender Export-Import Bank of China agreed to finance 85 per cent of the project. Specific terms of the new CRCC financing arrangements are not known at this time, although it is believed that China will offer less generous terms for the new tender, as it believes its original winning bid was unfairly revoked, as E&T reported last year.
Since taking office in 2012, Pena Nieto has courted Chinese money as a means of alleviating Mexico’s dependency on the US. For its part, China has expanded its footprint in Latin America and has promised investments of $250 billion over the next decade.