(Updates with confirmation of signing of agreement)
By Dave Graham
MEXICO CITY, Oct 27 (Reuters) - State-owned China Communications Construction Company (CCCC) reached a preliminary accord on Tuesday to build an industrial park in Mexico that could become one of the biggest-ever Chinese investments in Latin America’s second-largest economy.
The government of the western state of Jalisco and Liu Yueping, Americas chief of CCCC, signed a memorandum in Guadalajara, the state capital, to develop the park. It could give China a major foothold to supply the North American market.
The two sides agreed to carry out a six-month feasibility study to identify a suitable location and for two trips by officials to China to assess which manufacturing companies could participate. Jalisco officials hope that dozens will come.
“This is going to be a key source of jobs that will have an impact not just in our state, but also nationally,” Jalisco’s governor, Aristoteles Sandoval, said in a statement.
State officials told Reuters the plan is to develop a site of around 500 hectares (1,235 acres), with the Jalisco government paying for half the land, and the Chinese the rest. Paying for the park’s development would fall to the Chinese alone, they added.
The announcement is welcome news for Jalisco, which emerged relatively unscathed over the weekend after bearing the brunt of the impact of Hurricane Patricia, the biggest storm ever recorded in the Western Hemisphere.
How much the Chinese invest, which companies will come and where the park would be will depend on results of the feasibility study. The companies would have to be manufacturers for the project to go ahead, Jalisco officials said.
Industrial parks of a similar size developed in Mexico by global manufacturers have involved investment of sums ranging from hundreds of millions of dollars to more than $1 billion.
Guadalajara, the second-largest city in the country, occupies a strategic position between the biggest Mexican container port, Manzanillo, and the industrial belt of central Mexico, which is well-connected to the United States.
If the project in Jalisco proceeds, it would help mend economic fences between Mexico and China after they were damaged last year when President Enrique Pena Nieto abruptly canceled a $3.75 billion Chinese-led project in Mexico.
The high-speed rail contract awarded to a group led by China Railway Construction Corp Ltd was revoked as media reports surfaced that Pena Nieto’s wife was in the process of buying a luxury house from one of the consortium’s Mexican partners.
The cancellation caused dismay in Beijing and came just ahead of Pena Nieto’s first official state visit to China, which has so far made little foreign direct investment in Mexico.
Between 1999 and June 2015, Chinese FDI in Mexico was $380 million, less than that of Ireland, Puerto Rico and Taiwan, and accounted for under 0.1 percent of the total amount, according to Mexican government data. The U.S. sum was $186 billion.
China’s rapid economic growth over the past two decades has led to a much sharper rise in its labor costs than in Mexico, making the latter increasingly attractive for manufacturers. (Additional reporting by Brenda Goh in Shanghai and Gabriel Stargardter in Mexico City; Editing by Paul Simao and Dan Grebler)