China demands recompense after Mexico suspends high-speed rail scheme

The Chinese government has called on Mexico to respect the legal rights of Chinese firms after the Mexican finance ministry suspended the now-infamous $3.7bn high-speed rail project.

Mexico needs to "value and properly cope with the huge manpower and money Chinese enterprises invested in the project bid, and carry out measures for further bilateral cooperation", said a spokesperson for the National Development and Reform Commission, China’s top economic planning body, official news agency Xinhua reported.

A commission spokesperson also said: "We feel really sorry about the decision. Chinese companies have spent enormous efforts in bidding for the projects." 

Luis Videgaray, the budget minister (pictured), announced on 30 January that the "indefinite suspension" was the result of falling oil prices and the need to cut public spending. The federal government derives about a third of its revenue from the oil sector. The minister added that the project to build a $9.2bn international airport at Mexico City would not be affected. 

Gerardo Ruiz Esparza, the transport secretary, said the rail line, which was to have covered the 220km between Mexico City and the industrial hub of Querétaro, was suspended, but not cancelled.

Shares in China Railway Construction Corporation (CRCC), which led the consortium that had initially won the bid to build the line and supply the trains, fell by almost 10% on the Shanghai index after the announcement was made. The share price of train-maker CSR, which was part of the consortium, fell by more than 7%. 

The matter was taken up by China’s foreign ministry, as well. "We note the Mexican government’s decision, and China hopes the Mexican government can properly deal with subsequent problems, and ensure the Chinese enterprises’ legal rights and interests with concrete measures," a Chinese foreign ministry spokesperson told Xinhua.

These reactions echo those in November last year when the victorious Sino-Mexican consortium, led by China Railway Construction Corporation (CRCC), was told that the scheme was to be retendered after Mexican legislators expressed concerns over the fact that there has been only one bidder, and the Mexican press revealed that one of the Mexican companies involved in the bid owned a $7m mansion inhabited by President Enrique Peña Nieto and his family.

Then CRCC said then that it had launched an emergency plan and formed a team of legal experts, and would "resort to legal means to safeguard the legal rights of the company". The Mexican government conceded CRCCs right to reimbursement of its bidding costs, and in December it received an initial payment of $16m. 

Photograph: Luis Videgaray, who broke the news of the cancellation to the Chinese (source: Wikimedia Commons)

Story for GCR? Get in touch via email: [email protected]

Latest articles in Markets