Mexican Minister of Finance Luis Videgaray announced a decision to cut this year’s budget and the pinch will be felt with the plans for construction of two key rail infrastructure in the country, including a high- speed train project.
The bid to build the high-speed train project, which is expected to cost $3.75 billion and believed to be the first in Latin America if completed, was won by a Chinese-led consortium in November but the bid was soon canceled by Mexican government due to domestic reasons of Mexico.
Another bidding for the high-speed railway project was reopened in the middle of this month.
The budget cut will not affect economic growth projections for the year, said the official, though it does entail “definitively canceling” a proposed trans-peninsular rail line linking the southeastern Mexican states of Quintana Roo and Yucatan, as well as the suspension of the high-speed train project designed to connect Mexico City, the national capital, with the central state of Queretaro.
Videgaray cited plummeting oil prices as one of the main reasons behind the 2015 budget cut by 124.3 billion pesos ($8.42 billion), or an equivalent of 0.7 percent of the country’s gross domestic product.
Videgaray said the two rail projects nixed for now “not just because of the impact they would have on public finances in 2015, but above all because of the pressure they would place on public spending in the years following 2016”.
Also cited by La Jornada, Jose Luis de la Cruz, president of the Institute of Industrial Development and Economic Growth, said to suspend infrastructure projects such as the high-speed railway saves money for now but the move potentially hurts the economy in the long run as productivity will remain unchanged.
“We feel really sorry about the decision. Chinese companies have invested much in bidding for the project,” said China’s National Development and Reform Commission (NDRC) in a statement.
China hopes the Mexican government could deal with the problems caused by the suspension of the project appropriately, effectively protect Chinese companies’ legitimate rights and adopt active measures to promote pragmatic cooperation between the two countries, the statement said.
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