MEXICO CITY, April 20 (Reuters) - Chinese companies are turning their backs on Mexico in a chill that could last years, spooked by the cancellation of two high-profile projects that were supposed to usher in a new era of business between the manufacturing rivals.
Mexico is desperate to get the relationship back on track after its shock scrapping of a multi-billion-dollar high-speed train contract originally awarded to a Chinese-led consortium earlier this year, a move that angered Beijing.
Seeking to wean itself off dependence on the United States and compensate for an oil slump that hammered public finances, Mexico has sought to involve China in a new Mexico City airport, a multi-billion dollar mobile wireless network and its newly opened energy sector.
But after the train debacle and the acrimonious scuttling of a Chinese retail park planned in the resort of Cancun, some firms in China, whose economy is cooling, are deeply wary of Mexico and unlikely to ramp up business with Latin America’s second largest economy any time soon.
“At the moment, Chinese companies aren’t wanting to invest here. It’s dangerous. Really, it’s dangerous,” said Zhang Nan, chief Mexico representative of FAW, a state-owned car company. He said FAW has no Mexican investments planned.
“If we want to do a new project here, we should do so very carefully,” he said his bosses told him after the rail scheme foundered, urging him to view the failed project as a “lesson.”
China’s ministry of commerce said it had “an open and positive attitude” to Chinese companies working in Mexico and Latin America. Mexico’s transport and communications ministry declined to comment.
Since taking office in December 2012, Mexican President Enrique Pena Nieto has sought to deepen ties with China. The $3.75 billion rail project was an ideal way to lure China, which is keen to showcase its train savvy.
A group led by China Railway Construction Corp Ltd was the sole bidder and won. But its contract was revoked just before it emerged that Pena Nieto and his wife were living in a luxury house belonging to one of the Mexican firms in the winning consortium.
Mexico tendered the rail project again in January, and CRCC was expected to win. Then the government shelved it indefinitely as an oil price slump scythed spending plans.
An executive at China Harbour Engineering Company Ltd (CHEC), a unit of state-owned China Communications Construction Co Ltd, which was involved in the original rail bid, said Beijing had put a freeze on all Mexican projects as it weighed the repercussions of the train fiasco.
Speaking on condition of anonymity, he said CHEC was offered various projects, including an expansion of the northwestern port of Guaymas, a dry-dock construction project in the eastern port of Tuxpan and a gas pipeline in the Baja California peninsula, but was unlikely to get involved in any of them.
“They have no interest. I don’t think there will be widespread investment in Mexico for the rest of this administration (which ends in 2018),” he said. “They’re not going to invest until there is more certainty in this country.”
By contrast, CHEC is interested in building and financing a further expansion of the Panama Canal worth up to $17 billion, according to the canal’s administrator.
An official at China State Construction Engineering Corp in Beijing said it does not place Mexico among its Latin American investment targets, favoring instead Argentina or other countries around the Caribbean. He did not elaborate.
Between 2000 and 2013, Chinese investment in Mexico was just $281 million, a fraction of the $14.4 billion that China pumped into Latin America and the Caribbean in 2013 alone, official data shows.
Carlos Lome, a former member of Mexico’s export agency in China who now brokers trade deals out of Hong Kong, said a Chinese partner suspended a deal to import five containers of Mexican beef each month.
“When the (train) project was suspended, many Chinese firms saw it on Chinese TV, on the news, and they said to me, ‘If we can’t trust the word of the state ... what guarantee do we have that you won’t cancel?'” Lome said.
Mexico pulled the plug on the joint Chinese-Mexican Dragon Mart retail park in January following fierce local opposition.
The outlook is not entirely bleak for Mexico.
China Telecom Corp Ltd, which has been linked with a bid for a delayed $10 billion telecoms network here, says its parent is studying an investment opportunity in Mexico.
Days after the original train contract was revoked, during an awkward pre-arranged visit to Beijing, Pena Nieto announced both countries would set up a $2.4-billion infrastructure investment fund that could eventually rise to $9 billion.
So far, however, only $1.2 billion has been committed. (Additional reporting by Christine Murray in Mexico City, and Gerry Shih and Matthew Miller in Beijing; Editing by Simon Gardner, Dave Graham and Howard Goller)