Mexico wants China involved in new airport after train blunder

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Mexico is trying to get Chinese state-run companies involved in the construction of a new $11 billion airport as it seeks to make up for a tainted rail tender that soured relations with Beijing, a source with knowledge of the government plan said.

Mexico announced in September it would build the new Mexico City airport to relieve congestion and transform the capital into a major regional hub with six runways eventually serving 120 million passengers a year.

The airport is Mexican President Enrique Pena Nieto's flagship infrastructure project. The other, a high-speed train linking Mexico City with the city of Queretaro, was originally awarded to a consortium led by state-run China Railway Construction (CRCC). But it was later put on ice indefinitely - a move that shocked Beijing, officials say.

Senior Mexican officials believe that China could be assuaged by involving some of its state-run companies in the airport construction, said the source, who asked to remain anonymous because he is not authorized to speak publicly.

"In some levels of (China's) government there is deep disappointment and a deep lack of confidence toward Mexico," the person said. "The ball is in our court, and we have to show willingness with new projects."

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CRCC had the $3.75 billion rail contract revoked just days before it emerged that Pena Nieto's wife had bought a luxury house from one of the Mexican firms in the winning consortium.

Subsequent media reports showed the president and his finance minister had also either bought or used homes from the same government contractor.

Mexico tendered the rail project again in January, and CRCC was widely expected to win. But a sharp drop in the price of oil, which funds about a third of Mexico's federal budget, forced the government to suspend the project.

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After CRCC lost out, a delegation led by Mexican transport and communications minister Gerardo Ruiz Esparza told Chinese officials during a trip to Beijing that Mexico would welcome Chinese involvement in the airport, the source said.

"This is kind of paying a favor to the Chinese companies who were denied the Mexico-Queretaro train," said Daniel Avila, a senior member of the Mexican Senate's Asia-Pacific committee from the center-right National Action Party.

The source added Mexico believes Chinese firms would make a neat fit with Norman Foster, the chosen architect for the Mexico City airport who designed Terminal 3 of Beijing's airport.

China likes the idea, he said, but no decisions have yet been made on which state-run company would be chosen to bid for the upcoming tenders. Ruiz Esparza expects construction of the airport to get underway in September or October this year.

Chinese foreign ministry spokeswoman Hua Chunying said she did not know about the airport project, but added: "We have always said that we support able Chinese companies to go out and have cooperation with other countries on infrastructure construction and building."

Several Chinese companies with experience in large infrastructure projects including ChinaCamc Engineering and China Communications Construction did not reply to requests for comment.

Mexico is still weighing how to divide up work for the massive project, which includes contracts of varying sizes. While some airport contracts have already been assigned, the most juicy construction tenders are still under wraps.

Chinese companies would still have to win any tender, but Mexico could ask certain firms to participate, the source said.

"As far as I know, there's no specific invitation out to anybody," said transport ministry spokesman Rodolfo Gonzalez. "The desire is that everyone who is best equipped, who has the best technical and financing capabilities, should participate."

The project, financed by public and private funds, is scheduled to have three runways and serve some 50 million passengers a year by 2020.

Since taking office in 2012, Pena Nieto has sought to redraw Mexico's relationship withChina, a long-time manufacturing rival, and wean Mexico off its reliance on the U.S. market by luring much more Chinese investment.

Between 2000 and 2013, according to Mexican government data, total foreign direct investment from China in Mexico was $281 million - less than half the amount invested by Taiwan.

Chinese investment in Mexico has been just a tiny part of the total for Latin America and the Caribbean, which reached $14.4 billion in 2013, according to official Chinese data compiled by U.S.-based consultancy Rhodium Group.