The Brewing Mexico-China Romance Set to Stir Tensions With the US
WHY YOU SHOULD CARE
Mexico’s likely next president prepares to take on Donald Trump’s economic aggression - by rail.
By Jude Webber
In the crook of Mexico’s elbow lies the Isthmus of Tehuantepec, the country’s skinniest strip of land where the Atlantic and Pacific are just 200 kilometers apart. Winds from the west power electricity-generating turbines, the lush soil supports lemon, mango and other crops, and it is the heart of a vibrant indigenous Zapotec culture. The brightly colored embroidered blouses and skirts, immortalized by Frida Kahlo, are still daily attire.
But it is also home to some of Mexico’s poorest communities. A powerful earthquake in 2017 caused devastation only four years after a hurricane pummeled the isthmus simultaneously from both shores. Now, Andrés Manuel López Obrador, the front-runner in Mexico’s July 1 election, has his sights set on the gateway to Mexico’s deep south. He wants to revitalize a rail corridor across the isthmus that could act as a Panama Canal Lite, opening up a shortcut to the Atlantic.
I can see us perfectly well approaching the Chinese, above all.
Gerardo Esquivel, economic adviser to Andrés Manuel López Obrador
The plan is by no means new: talk of reactivating a trade corridor here has swirled for decades. But Gerardo Esquivel, a Harvard-trained economist and development expert who is one of López Obrador’s economic advisers, sees China as a natural fit to make it happen. China is investing in “new Silk Road” trade corridors spanning 65 countries under its Belt and Road Initiative, as well as increasing investment in Latin America beyond its traditional focus on raw materials.
“I can see us perfectly well approaching the Chinese, above all. It’s the type of project they will certainly want to invest in, because they are long-term infrastructure projects with clearly positive returns,” Esquivel says. The project is expected to cost $7 billion in the first year alone and to require a combination of public and private funding.
Esquivel portrays the corridor as an emblematic project, not only providing an alternative route to allow cargo to avoid the Panama Canal more than 2,000 kilometers to the south, but also giving businesses a reason to locate to Mexico’s depressed south.
From 2014 to 2016, Mexico netted more than 40 Chinese investment deals valued at more than $4 billion, according to an Atlantic Council study. The think tank called that “a remarkable amount considering no previous year had seen more than five deals.”
There is one snag: China has a less than happy history of investing in Mexican infrastructure. Beijing tried to champion another big project four years ago — a high-speed rail link to connect Mexico City and the city of Querétaro. President Enrique Peña Nieto was forced to scrap a contract awarded to a consortium led by China Railway Construction Corp. — an embarrassing two days before a visit to Beijing — after an outcry over transparency. It then emerged that the president’s White House family mansion had been paid for by a contractor who was a member of the Chinese-led train consortium.
That is just the kind of murky, crony corruption scandal that “Amlo,” as López Obrador is widely known, is crusading to eradicate. He is streets ahead of his rivals with 48 percent support, according to a poll of polls. Ricardo Anaya, at the helm of a right-left coalition, has 28 percent and the ruling Institutional Revolutionary Party’s candidate, José Antonio Meade, has only 21 percent.
A southerner himself, from the state of Tabasco on the Atlantic side, López Obrador will want to announce the Trans-Isthmus Corridor “on the first day of his government,” Esquivel says. He suggests that Carlos Slim, the telecom mogul with big infrastructure interests, might also be keen; he partnered with López Obrador on the regeneration of the historic city center during Amlo’s five-year tenure as mayor of Mexico City.
However, Marcelo Ebrard, who is spearheading López Obrador’s campaign in northern Mexico, says he expects U.S. investors to be the most interested: “It makes more sense. The U.S. is our main partner,” he says.
Whoever invests, Amlo, a history buff, can take heart from a report by W. Max Miller, secretary to His Majesty’s Legation at Mexico in 1907, on prospects for the original British-built railway. “It is always dangerous to prophesy,” he wrote, “but if pluck and perseverance are to have their reward, certainly the Mexican Isthmus route should be a success.”
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