CRCC likely to win in new bidding for Mexico train project

China Railway Construction Corp (CRCC) looks poised to clinch a contract to build a $3.75 billion Mexican high-speed train system even after its original winning bid was revoked when it became engulfed in a political scandal, Reuters reported Wednesday, citing sources with knowledge of the bidding.

Mexico was set to reveal the fresh bid terms on Wednesday for the tainted train project linking Mexico City with the wealthy, industrial city of Queretaro, which was meant to be one of Mexican President Enrique Pena Nieto's flagship infrastructure investments.

People close to the Chinese rail giant or familiar with rival bids say CRCC is still likely to win, given its broad financing plan, its cheap high-speed technology and political support in Mexico.

CRCC did not immediately respond to request for comment. In the last tender, State-backed lender Export-Import Bank of China agreed to finance 85 percent of the project.

Both Mexico and China have stressed the importance of the project, which would produce Latin America's first high-speed trains, and 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 tender, leaving a consortium led by State-controlled CRCC as the de facto winner, it led to awkward questions in 2014.

"The process was compromised from the outset, that's without question," said a person on the Chinese side of the original bid, who asked to remain anonymous. The source said the tender favored the Chinese.

The controversy exploded when it surfaced that Grupo Teya, one of the Mexican firms in the CRCC-led consortium, was a subsidiary of a government contractor that owned a multi-million dollar home Pena Nieto's wife was in the process of buying.

The government revoked the contract on November 6, a few days before the Teya revelations were published.

Mexico's Communications and Transport Minister Gerardo Ruiz Esparza told lawmakers in late December that none of the Mexican firms in the original consortium will take part in the new tender, and it remains to be seen with which companies CRCC will now partner.

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 noted that his company could only finance building the trains, but not the tracks, stations and other infrastructure like the Chinese.

His company is banking on continued public outrage to scupper the Chinese bid.

The Mexican government denies the process was designed to benefit the Chinese, and has welcomed the decision by CRCC to bid again.