Mexico’s Senate has voted down a colossal tax hike, previously approved by the House of Congress, to fund railway mega-project.

The proposal which came to the Senate was to increase immigration services tax by 388% and would have impacted both Mexican nationals with relatives abroad and potential tourists.

The tax was largely justified by supporters to fund the Mayan Train, a 1,475km railway around the Yucatan peninsula. Announced in December 2018, the four-year project was originally budgeted at $7.4bn.

Such an extreme funding strategy suggests that project finances have become difficult to sustain, especially after previous funding attempts failed. For example, the Mexican Grand Prix has already had funding from the Department of Tourism revoked and Mexico’s Tourism Board has been decommissioned, both to divert funds to the railway.

In June, major cutbacks were also made. There were intended to save $287m by reducing the length of the railway by 55km. Plans are pushing ahead nonetheless.

Environmental and indigenous concerns

Resistance to the planned railway on environmentalist grounds is another risk factor that is being ignored. Activists were protesting against the plans even before they were officially announced.

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By GlobalData

The National Institute of Indigenous Peoples (INPI) still needs to give official permission for the railway, which will traverse a UN-protected reserve of pristine rainforest. Approval could take months. President Lopez Obrador is still effectively going ahead without this legally-required decision and a series of tenders for contractors and services were announced in March 2019.

The President has sought validation through a ritual officiated by indigenous Mayan priests, promising no underground tunnelling and to use low-emission locomotives. Yet this will not prevent massive environmental damage.

Negative impact from Lopez Obrador’s social project

Local people in the Yucatan peninsula have been assured the rail line will create “hundreds of thousands of jobs”, whilst boosting income from tourism.

Some of the country’s biggest attractions will indeed be made more accessible to tourists, including the beaches at Tulum and Mexico’s most famous archaeological site, Chichén Itzá.

Despite these promises, the EZLN Zapatista group, a powerful force in Mayan politics, has already promised to oppose the project, saying it will mean “destruction” for local people and their culture.

Other infrastructure projects, including an oil refinery and a new airport, are already weighing on Lopez Obrador’s budget. The Mayan Train will further impact spending in other areas of society.

The government is making an all-in bet on infrastructure which is fraught with uncertainty. The Senate has prevented its most wayward move yet, but this will not be the end of the line.