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Mexico suspends high-speed train project as it decides to cut budget

Xinhua, January 31, 2015 Adjust font size:

Mexican Minister of Finance Luis Videgaray on Friday 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.

While addressing a press conference, Videgaray cited plummeting oil prices as one of the main reasons behind the 2015 budget cut by 124.3 billion pesos (about 8.42 billion U.S. dollars), or an equivalent of 0.7 percent of the country's gross domestic product.

The 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.

The bid to build the high-speed train project, which is expected to cost 3.75 billion U.S. dollars for construction and believed to be 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.

Videgaray went on to explain that 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."

According to the official, also impacted by the budget cut of the country are Mexico's state owned oil company Pemex, which will see its budget shrink by 62 billion pesos, and the Federal Electricity Commission, which will have a cut of 10 billion pesos in its budget. Endite