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Chinese investment in Mexico put on hold

Chinese investment in Mexico put on hold

The cancellation of a high profile transportation project has affected prospects for Chinese investment in Mexico for the time being.

 

Since assuming the presidency in 2012, Enrique Pena Nieto has held broadening business relations between his country and China as an important objective. While investment that flowed from the Far East’s most prolific economic powerhouse to Latin America and the Caribbean totaled US $14.4 billion in 2013 alone, Chinese investment in Mexico during the period covering 2000 – 2013 was an almost inconsequential $US 281 million. Pena Nieto fixed his gaze on securing Chinese investment in Mexico as a way to diversify sources of capital inflows, and to reduce his country’s high degree of dependence on the United States for economic partnership and exchange, as well as to mitigate some of the negative economic effects linked to the global fall in the price of a crude oil.

During the last quarter of 2014, Pena Nieto was on the right track as regards achieving his goal, when, in November, he announced that a Chinese led consortium had been awarded a bid to construct a US $3.7 billion high-speed rail line in Mexico. When built and operational, a Chinese-made bullet train would traverse approximately one hundred and thirty-four miles of countryside between the Federal District and the industrial City of Queretaro to its Northeast. The bid was awarded to the China Railway Construction Corp., (CRCC) Ltd, and its partners which included two CRCC Chinese affiliates and three Mexican construction companies. Although several other firms such as Germany’s Siemens, France’s Alstom and Canada’s Bombardier expressed keen interest in submitting bids in order to solicit the business, they were not able to do so in the time frame that was stipulated by the Mexican government. As a result, the China Railway Construction Corp., Ltd. was the lone bidder.A few days after the award, CRCC’s contract and that of its three Mexican partners was unexpectedly revoked.

The decision to withdraw the business occurred amidst allegations of irregularities between the Pena Nieto government and some of the participants in the deal. After the announcement of the revocation of the bid award was made public, shares of China Railway Construction, Ltd. stock lost five percent of their value on the Shanghai Stock Exchange.

As a result of the derailment of the Mexico City – Queretaro high-speed train project, Chinese investment in Mexico has been put on hold for the foreseeable future. Several prominent businessmen, including a ranking executive with the China Harbor Engineering Company, Ltd., (CHECH), have expressed that China’s business community, as well as its government’s economic officials, have lost confidence that the present Mexican government can ensure certainty as regards its investments. There are those that speculate that Chinese investment in Mexico that was in the process of being
considered in other areas will not be pursued again until after 2018. These projects include:

  • the expansion of the Northwest Port of Guaymas
  • the construction of a shipyard at the Port of Tuxpan in the State of Veracruz;
  • the installation of a wireless communications network;
  • the building of a pipeline to carry natural gas in Baja California.

According to Zhan Nan, the spokesperson for China’s First Automobile Works in Mexico, his company and others have put Chinese investment in Mexico on hold for the time being.

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