Mexico halts Chinese mega-mall project after damage to environment

Mexican government orders halt to construction of massive mall project in Cancun catering to Chinese vendors

It was supposed to be a major Chinese foothold for doing business in Latin America, the largest venue for selling Chinese goods in the Western Hemisphere.

The multimillion-dollar Dragon Mart mega-mall would cover nearly 1,400 acres two miles from the Caribbean Sea just south of the posh Cancun resort area and cater to an army of Chinese vendors.

But Mexico has pulled the plug on the project, the second huge endeavor involving Chinese business that the government of President Enrique Peña Nieto has canceled in just under three months.

After a protracted legal tug of war, Mexico’s environmental protection agency ruled this week that the project, which has been in the works since 2013, had done serious harm to the area’s sensitive beaches and protected flora and birds. It ordered all work shut down and imposed about $1.5 million in fines on the Dragon Mart developers.

The agency’s federal prosecutor for environmental protection, Guillermo Haro, said his office had determined “with all clarity that the activities the developers were conducting have deteriorated, impacted and damaged conditions of ecological balance, forest ecosystem and biodiversity of the zone.”

About 370 acres of mangrove and other plant life and seascape have been razed or damaged south of Cancun’s white beaches and turquoise waters, Haro said.

The decision reversed a ruling by the federal government that greenlighted the project. Haro said the government had erred. The fines were of “historic” amounts, he said, and the developers could also face jail time for the damage done to wetlands and other protected lands.

Dragon Mart developers contend that Mexico is missing out on a profitable, job-creating opportunity to thrust itself into the center of East-West commerce. Buyers from all over the Americas, “from Canada to Argentina,” could find vast quantities of Chinese products in easy-to-reach Cancun, already the destination of more than 10 million visitors annually, they say.

The Cancun Dragon Mart would be the second-largest retail venue for Chinese products outside China, behind a Dragon Mart erected in 2004 in Dubai, United Arab Emirates, company executives said, and would provide the Chinese with a huge entry into a continent where trade with Asia is growing fast.

But the $200-million project has been opposed by environmentalists who feared ecological destruction and Mexican industrialists who objected to the flooding of their markets with cheap Chinese wares. Plans called for Dragon Mart to house 3,040 exhibition spaces for Chinese-produced electronics, software, toys, clothing, home-building supplies and other goods.

The project was being financed by a consortium of Mexican developers and a Dutch-registered company run by a Chinese businessman. Plans also envisioned housing for about 700 Chinese nationals in the middle of the complex.

Juan Carlos Lopez, Dragon Mart’s executive director, in a 2013 interview with The Times compared the planned retail center to a giant, permanent “trade show in Vegas.”

On Wednesday, Lopez told The Times that he considered the shutdown temporary and that his company would continue to fight the decision in court. “We figure that the legal matter could still take 10 to 12 months to resolve,” he said.

The city government of Cancun originally denied Dragon Mart a building permit, but the developers obtained permission by appealing to state and federal governments more sympathetic to the project and keen on expanding trade with China. It is that federal permission that was revoked this week.

Environmentalists welcomed the decision. The Mexican Environmental Law Center said the move set an important precedent by requiring builders to get permits and respect environmental impact, steps developers in Mexico routinely skirt.

“Development projects are very necessary in our country to promote growth and job creation,” the center’s representative in the Cancun area, Alejandra Serrano Pavon, said in a statement. But “development must come with a vision of sustainability.”

Serrano said in a telephone interview that she doubted Dragon Mart would be able to get around the fines and requirements that denuded land be reforested, and acquire new permits to revive the project any time soon.

“This is a positive message,” she said.

Araceli Dominguez, president of Mayab, a prominent environmental group in Cancun, said, “The developers never did the correct thing … and thought that by doing dirty business with the state government they were going to achieve their goals.”

Haro said that despite Lopez’s vow to fight on, it was doubtful the project could move ahead. “It would be difficult now to build a project of these dimensions,” he said.

Mexican industrialists also praised stopping Dragon Mart, which they said would have flooded the domestic market with 300,000 tons annually of Chinese merchandise worth $2 billion.

“Canceling the project sends a clear signal to investors [against] the use of disloyal competition,” Francisco J. Funtanet Mange, president of Mexico’s major chamber of industrialists, said in a statement. The decision represents “a good result for Mexican industry.”

In November, the government canceled a $4-billion contract with a Chinese-Mexican consortium to build a bullet train from Mexico City to the industrial hub of Queretaro.

Officials said they were responding to an appearance of favoritism with the awarding of the contract, though they denied any impropriety. It later was revealed that one of the winning bidders had sold a mansion to the president’s wife under favorable terms.

Twitter: @TracyKWilkinson

Sanchez is a news assistant in The Times' Mexico City bureau.

Copyright © 2016, Los Angeles Times


5:56 p.m.: This article has been updated and expanded.