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Puerto Vallarta News NetworkNews Around the Republic of Mexico 

Canceled Train Deal Costs Mexico $16 Million (So Far)

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December 3, 2014

Communications and Transport Secretary, Gerardo Ruiz Esparza, said the Mexican government would pay the winning bidder's non-recoverable costs after the rail contract was canceled. Esparza is in the center.

Mexico City, Mexico - Mexico has compensated the Chinese-led consortium with over 100 million yuan (16.3 million USD) after its government cancelled a rail contract that the group had been awarded in November.

Chinese state-owned enterprises including China Railway Construction and CSR Corporation – which were part of the ill-fated consortium – will put in their bid as soon as a new tender for the project begins, said Professor Wang Mengshu, a senior scientific advisor to the Chinese government on high-speed rail projects.

"We will certainly make a new bid. We are confident that the terms we offer will still compare favorably against other bidders," said Wang, who is also deputy chief engineer of state-owned construction company China Railway Tunnel Group.

"Mexico has paid the consortium more than 100 million yuan in compensation for the costs that went into preparing for the bid," he said, adding that they had yet to arrive at a final figure for restitution.

It remains to be seen whether the four Mexican firms who were part of the consortium would also take part in the new bid, he said.

The compensation comes after China Railway Construction on November 11th threatened legal action against the Mexican government over its decision to revoke the $4.3 billion contract to build a 130-mile rail link between Mexico City and Queretaro state.

Mexico’s Communications and Transport Secretary, Gerardo Ruiz Esparza, previously said the government would pay the winning bidder non-recoverable costs, but did not give an estimate of how much that would be.

The contract had been awarded to China Railway and its partners on November 3rd, after all other potential bidders bowed out, arguing that they did not have enough time to prepare their bids in the two-month process.

But on November 6th, the Mexican government annulled the deal over public concerns about the bidding process. Just two days later, Mexican media reported that President Pena Nieto’s wife Angelica Rivera was living in a $7 million mansion registered under the name of a Mexican firm that was part of the winning consortium.

Mexican officials said the contract’s cancellation was not related to concerns over the mansion, but rather the need to "strengthen the absolute clarity, legitimacy, and transparency" of the bidding process.

Mexico's government later announced it would open a new round of bidding.

Wang said the China Railway-led consortium was currently in Mexico again, negotiating on the new tender. He added that relations between the group and the Mexican government remained harmonious.

"Our high-speed railway, with its high technology, safety standards, and low costs, will compare favorably with any other company in the world. That’s why we’re seeing more and more orders for our high-speed trains all over the globe," he said. "It also benefits China – not just financially – as it will build up a good reputation for the state around the world."

Wang believes the consortium’s chances of winning the new tender are high because their competitors - including companies from Japan and Turkey - cannot offer a comparable standard of construction and maintenance support.

Original Story