Mexican President’s Ties to Contractor Raise Questions / NYT



Parts of a protected forest in Xochicuautla, Mexico, have been cut, exposing the path of a highway that is demolishing areas of an indigenous community. CreditAdriana Zehbrauskas for The New York Times

SAN FRANCISCO XOCHICUAUTLA, Mexico — Armando García has filed lawsuits, joined protests and gotten arrested trying to stop a highway from slicing through his hilly backyard in a nature reserve.

But even with a court order on his side, bright green pines have been stripped away and tree stumps dot the hillside. Parts of protected forest have been slashed, exposing the path of a 20-mile highway to the new airport in Mexico City that is demolishing swaths of Mr. García’s indigenous community in its wake.

Mr. García and his neighbors fighting it say they never really stood a chance. After all, they are not battling ordinary construction crews. They are taking on a businessman so well connected that Mexicans have long called him the president’s “favorite contractor.”

After years of demonstrations and court battles, President Enrique Peña Nieto signed an executive order this month expropriating 91 acres of what many here consider sacred land. And is it any wonder he did, residents argue. The same contractor carving through their land has held the title to the president’s family mansion, provided a house to the finance minister for zero profit and does billions of dollars in deals with the government.

Armando García in his unfinished home in Xochicuautla, Mexico. Mr. García has filed lawsuits in an effort to stop a highway from slicing through his backyard.CreditAdriana Zehbrauskas for The New York Times

“We knew the president’s political grip in this state goes back for years and years,” Mr. García said. “We just didn’t know it would end up affecting us directly, so badly.”

Mr. Peña Nieto’s relationship with the contractor is one of several recent scandals that have raised tough questions for the president, tainting his legacy and further eroding the public’s already shaky faith in the country’s governing institutions.

All around Mexico, people are busy debating another blow to the administration: how one of the world’s most notorious drug lords, Joaquín Guzmán Loera, known as El Chapo, managed to sneak out of a maximum-security prison this month by building a mile-long tunnel right under the nose of the authorities. How was that possible without the help of someone in power, many Mexicans are asking.

Residents in the path of the highway say their battle against the government raises troubling questions, too. How did a friend of the president’s who started out selling office supplies like Post-it notes wind up running an empire that collects billions of dollars in government contracts, getting the green light to pave through a protected forest and winning bids to build hospitals and trains?

The president and his inner circle have not been charged with any wrongdoing in either case. The findings of a government inquiry into the president’s family mansion are imminent. A separate investigation is examining Mr. Guzmán’s escape.

But while the two cases have important differences, they have caused widespread frustration, tapping into a broad sentiment that despite Mr. Peña Nieto’s claims that Mexico and his Institutional Revolutionary Party have changed, some of the country’s most fundamental problems have not.

“It’s evident that this issue with El Chapo and the issue of the contracts is the same: corruption,” said Manuel Huerta, an opposition congressman who wrote a book detailing the contracts. “It shows the incompetence, impunity and corruption of this government.”

The company building the highway is owned by Juan Armando Hinojosa Cantú, a government contractor with close ties to the president that date back to when Mr. Peña Nieto was an ambitious young aide in the State of Mexico.

Newly obtained records show that Mr. Hinojosa’s companies and its affiliates have secured at least $2.8 billion in business with government agencies, through more than 80 contracts, which opposition legislators and other critics contend are the result of a decades-long relationship between the two men.

Mr. Hinojosa’s close ties with Mr. Peña Nieto were a source of contention even before local journalists discovered late last year that the president and his wife were buying a 15,000-square-foot house that Mr. Hinojosa had built to their specifications on unusually favorable terms.

The first lady, a former soap opera star, said she was purchasing the house on credit for $4 million. Mr. Peña Nieto also used a second home owned by one of Mr. Hinojosa’s companies as an office during his presidential campaign and before he took office in 2012.

President Enrique Peña Nieto has signed an executive order expropriating 91 acres of what many consider sacred land. CreditPool photo by Thomas Samson

After a torrent of accusations that the president and his finance minister, Luis Videgaray, were receiving special favors from a contractor who wins lucrative government deals, Mr. Peña Nieto defended himself, saying there was no conflict of interest. The first lady, Angélica Rivera, has said that she paid off nearly a third of the house with her own money, and that she would sell her rights to the purchase.

Still, the president acknowledged “that the allegations have generated the appearance of something improper.” He then named one of the finance minister’s longtime friends to investigate, causing more consternation among critics.

Mr. Peña Nieto canceled a government contract for a $3.7 billion train, a signature project being built by a consortium that included one of Mr. Hinojosa’s companies.

But other major deals involving Mr. Hinojosa have continued, including the highway, the cost of which was originally expected to be $132 million but has swelled to $207 million, budget records show. Beyond that, Mr. Hinojosa’s companies have won a $74 million no-bid contract to renovate the presidential airplane hangar; a $104 million road-widening project that has grown to $127 million; and a 37 percent stake in an enormous aqueduct plan to bring water to Monterrey.

The aqueduct deal has become particularly contentious. One of the companies involved confirmed that the project is expected to cost $3.5 billion in construction, maintenance and operations over 30 years. Under those terms, Mr. Hinojosa’s share comes close to $1.3 billion.

Only collusion between the federal government and its contractors could explain such a soaring price tag, contended Jaime Rodríguez, the governor-elect of Nuevo León, where the aqueduct will be built. He is vowing to kill the deal, adding to the chorus of complaints about the president and his corporate partners.

“The president has said he does not meddle in contracts, and that he did not participate in the request for bids,” said Haydeé Pérez, the executive director of Fundar, a research group in Mexico City. “That is not true: If he can verbally cancel a contract when there is no institutional mechanism for that, then he is also able to deliver those contracts.”

Mr. Peña Nieto’s office declined to answer questions about his relationship with the contractor, citing the investigation that the “president ordered to be carried out, with the objective to not influence the direction or hinder its course.”

The finance minister did not respond to a request for comment, nor did the head of Mr. Peña Nieto’s party or the state agency in charge of the highway project. Mr. Hinojosa’s personal assistant said he was “too busy” to respond.

Mexican legislators and officials said that the contracts awarded to Mr. Hinojosa’s various companies over the years, including his conglomerate known as Grupo Higa, cover a wide array of enterprises, spanning asphalt, publicity, construction, air transport, concrete, real estate and highways.

Despite his tremendous influence, Mr. Hinojosa remains something of an enigma. He has never spoken publicly about the home he built for the president and his wife, even though the arrangement was first reported eight months ago.

By all accounts, Mr. Hinojosa, a native of the State of Tamaulipas, arrived in the State of Mexico, Mr. Peña Nieto’s home state, in the 1980s. He got small contracts for government printing and publicity projects, making inroads with the tightknit political clan that the president, his party and some of his relatives have built to maintain a grip on power, jobs and business deals in the state for generations.

In 2000, Mr. Hinojosa gave tens of thousands of dollars in a donation to Mr. Peña Nieto’s powerful party, known as the PRI, records show. His companies eventually billed the government for everything from stoves to gentleman’s shirts, according to records on government transparency websites.

A small chapel in the path of a highway construction project.CreditAdriana Zehbrauskas for The New York Times

The business relationship started under the state’s former governor, Arturo Montiel. And it blossomed under his young, ambitious protégé — Mr. Peña Nieto — who began as the governor’s private secretary and later occupied state cabinet positions with access to influence contracts.

“There was evidence that the power that Grupo Higa had descended from Peña Nieto, but nobody wanted to see it,” said Francisco Cruz, who has written several books about the president and his influential friends. “In 2011, I asked for all the contracts his company had just in the State of Mexico, and they added up to 23 billion pesos,” or about $1.8 billion at the time.

Some of the most disputed projects happened after Mr. Peña Nieto became governor of the State of Mexico in 2005. One of Mr. Hinojosa’s companies built a $509 million hospital that cost several times as much as other new hospitals in the country. Another big project in which he had a major stake — a performing arts center — was built in such a far-flung location that it was criticized as a white elephant.

Other contractors balked, saying they were getting shut out of public projects.

“Juan Armando Hinojosa arrived here with nothing; it seemed like he became a millionaire in a matter of days,” said José Altamirano, a former government official who is now representing construction firms with legal disputes against the government.

When Mr. Peña Nieto ran for president, one of Mr. Hinojosa’s companies ferried him around in a helicopter free, the Mexican news media reported. The president was also widely reported to have been the witness at the wedding of Mr. Hinojosa’s son, also named Juan Armando. Then the junior Hinojosa died in a late-night helicopter crash three years ago, after a dinner to celebrate Mr. Peña Nieto’s 46th birthday.

When Mr. Peña Nieto won the presidency, the contracts grew, including the hotly debated aqueduct.

Experts agree that it is not unusual for every presidential administration to have its favorite contractors, but they said that Mr. Hinojosa’s variety of contracts and the amounts were astonishing.

“They are used to working with a little impunity,” said Edna Jaime, the executive director of México Evalúa, a good-government civic organization. “They figured the way things were done in the State of Mexico could be repeated here in the capital.”

Fausto Hernández, an economist at the Center for Economic Research and Education in Mexico City, said that having a conglomerate control so many government contracts generally increases the price, particularly because markups to cover up kickbacks are routine.

“The message is: It doesn’t matter how talented, how innovative, how capable you are as a businessperson. The only thing that really matters is your political connections,” he said.

Here in Xochicuautla, the president’s eminent domain decree ordered that the community be compensated nearly $715,000. But the protests have continued, including another one this week.

“We are invisible to the Mexican State,” said José Luis Fernández, 54, a construction worker who lives here.