The cost overruns of the Mayan Train, AMLO and other factors

How much will the Mayan Train cost? In mid-2020 AMLO said that it was going to cost 120 or 130,000 million pesos. In May 2023 we have that 220,853 million have been spent and there are 139,863 million more assigned in this year’s budget. The account goes to 360,000 million, when the work is 58% complete, explains Alejandro de la Rosa in a work published by El Economista. In the most optimistic scenario, the Train will be inaugurated in December and “only” will have a cost overrun of close to 200 percent.

What happened? The work has had at least seven changes with respect to the original outline. It has also undergone important adjustments in the construction method. Some of the modifications were justified by unforeseen “problems” found on the ground and others by the obligation to preserve some sites of archaeological value. Adjustments also had to be made in response to the arguments of some groups. Due to issues related to land tenure and rights of way, it was decided that the route would not pass through the capital of Campeche or touch Mérida.

In the section that would go from Cancun to Playa del Carmen, the route was changed, due to the damage that the construction was causing on Highway 307 and due to the pressure of the hoteliers who made it clear that the construction would harm the tourist activity in an area that It receives 35% of the American tourists who come to Mexico and had been severely affected by the covid.

Could it be otherwise? It is normal for large projects to have cost overruns, but one close to 200% is exceptional, says Manuel Guadarrama, from IMCO. The public finance expert believes that in railway projects the “normal” cost overrun would be around 45%. If we apply the percentage that Guadarrama says, the most logical thing would be that the Mayan Train would cost more or less 175,000 million pesos. In other words, this mega work continues to cost at least 125,000 million pesos. This is 6,950 million dollars, considering the exchange rate of the superweight in the first week of May 2023.

Yes it could have been otherwise. In the cost overruns of large works we see reflected the excess of optimism, poor execution and institutional weakness. Over-optimism has to do with underestimating costs and risks. López Obrador criticized the cost overruns of the works of the past and assumed that it would not happen to his government. He overestimated his ability to control risks and keep at bay the upward pressure of the costs of a super complex project. He supposes that a fortnightly visit to the construction site is enough to order reality. In appointing those in charge of the work, he applied his maxim of 90% loyalty and 10% capacity. The first person in charge of the Mayan Train, Rogelio Jiménez Pons, had no experience in directing large works and could not handle the order. The second manager, Javier May, also has no experience and has managed the project with a lot of politics and little administration. May does not aspire to become an expert in mega works. He wants to be governor of Tabasco.

Execution problems are the Achilles heel of great works. This occurs in 75% of cases, according to a study by the McKinsey consultancy that reviewed 48 projects around the world. On the Mayan Train, we have had thousands of trees felled that could have been avoided, because they were in a path that was ultimately discarded. We have also had damage to cenotes that “appeared” on the route planned for the Train (in an area where cenotes abound). In section 5 that goes from Playa del Carmen to Tulum, Germán Larrea’s Grupo México, which had won the contest, left the project with an argument that speaks of the clash between dreams and reality. “A breach derived from new requested delivery dates was avoided. The seriousness and professionalism of the consortium led it to decline due to the complexity and haste imposed on the completion of the project,” the construction company said in a statement.

The institutional weakness in the Mayan Train is evident in the way in which the environmental impact has been treated and the way in which the schedule of the work has been defined, which has been more based on the times of the president than in relation to the complexity of the work. The work began without having the Environmental Impact Statements completed and it shows. The icing on the cake is the granting of the title of Honorary Supervisor of the project to Daniel Chávez Morán, owner of Grupo Vidanta. Chávez Morán is a very successful businessman who, in the best of cases, does not have time to carefully carry out supervision tasks. At worst, he is at risk of a conflict of interest assumption.

In addition to the cost overruns, it remains to be seen if the Mayan Train will finish on time. The coin is in the air. If we could ask Bent Flyvbjerg, the world’s leading expert on mega projects, he would tell us that it is very difficult for a work to escape the Iron Law of this type of construction: Over Budget, Over Time, Over and Over Again. In Spanish it is said With cost overruns and out of schedule, over and over again.

lmgonzalez@eleconomista.com.mx