The new rail line under construction between Mexico City and Toluca. The new rail line under construction between Mexico City and Toluca.

Overruns make train unviable: think tank

IMCO charges that Mexico City-Toluca train is 55% over budget

Cost overruns on the Mexico City-Toluca intercity passenger train project make it unviable according to the specifications of its own cost-benefit analysis, a Mexico City-based think tank has charged.

A study by the Mexican Institute for Competitiveness (IMCO) concluded that the still incomplete project has exceeded its budget by 55%.

In the five years since the project started, 59 billion pesos (US $3.1 billion at today’s exchange rate) have been officially allocated to build the 57-kilometer elevated rail line.

However, IMCO charges that the real amount is much higher.

A cost-benefit analysis completed by the firm Senermex, on which the project was based, says that if the investment amount is exceeded by more than 25% “there is a risk that it ceases to be socially worthwhile.”

Therefore, IMCO says the cost of the project does not justify the social benefits it will generate.

The IMCO analysis also concluded that the contracting process for the railroad’s construction was “disorganized and opaque.”

At a press conference, IMCO anti-corruption director Max Kaiser gave additional details about the results of the organization’s revision of public information related to the project’s 23 contracts.

“Today we know that it will cost at least 20 billion pesos [just over US $1 billion] more [than the original budget]. We know that because that amount was requested in this year’s budget,” he said.

“I’m embarrassed to say that I don’t know how much [money] has been used . . . they haven’t shared with us how much has been spent on each contract nor how many amending agreements there have been . . . and how they will cause or already caused a budget impact,” Kaiser added.

Kaiser also said that he is aware that a further request for funds has been made to cover legal expenses related to right-of-way disputes with people who own land on the route.

In addition, he pointed out that five questions that IMCO put to the Secretariat of Communications and Transportation (SCT) about the 23 contracts as part of its study didn’t receive a response.

Among the unanswered questions, Kaiser said, were:

• Was the payment for goods and services within the budget?

• Were there excessive overruns in the contracts? and

• Were there substantive changes in the contracts?

He explained that SCT officials responded to requests for the information by saying that they didn’t have any relevant documents or that they didn’t exist.

In response to the IMCO conclusions, the SCT official responsible for the project rejected the charge that it was running over budget.

Guillermo Nevárez Elizondo said that 52 million pesos of the allocated budget had been spent so far and that the only comparatively modest overrun had occurred in 2015 due to inflation, fluctuations in the exchange rate, payments for right-of-way easements and changes that had to be made to the route.

“The assertion that the current cost of the Mexico City-Toluca interurban train is 50% more expensive than the initial cost is inaccurate and far removed from reality,” he said.

Nevárez also said that it was “subjective and incorrect” to cast doubt on the transparency of the contracting process.

The train line, considered the second most important infrastructure project of the current federal administration, has faced several delays but the federal government rejects that it is behind schedule and estimates that it will open at the start of next year.

Source: El Economista (sp)

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