Mexico's top court strikes down decree tied to Grupo Mexico railway takeover

MEXICO CITY (Reuters) -Mexico's top court invalidated a presidential decree on Monday that declared a pair of major transport projects a matter of national security, which would have reduced civilian oversight and made future legal challenges more difficult.

One of the projects is a rail line known as the Mayan Train which aims to link tourist spots in the Yucatan Peninsula and the other is the so-called Inter-Oceanic Corridor, a mixed industrial project that in large part looks to connect Mexico's Pacific and Gulf coasts and boost trade.

President Andres Manuel Lopez Obrador has argued the decree is needed to protect the "strategic" nature of the projects, citing the government's role in ensuring secure transport of goods and people.

The national security designation would allow the government to keep many aspects of the projects secret, as well as make it much harder for opponents of the projects, such as environmental groups, to seek to block them in court.

The president's critics, however, have derided the decree as part of a growing militarization of public works.

The Supreme Court's ruling marks the second time the jurists have struck down Lopez Obrador's bid to put the projects under national security protections.

The court ruling will likely intensify a fight over the legality of some of the president's policies.

Earlier on Monday, Lopez Obrador said his government is willing to pay compensation - if necessary - and reach an agreement with the transport unit of mining and rail conglomerate Grupo Mexico, which holds the rights to tracks on the Inter-Oceanic Corridor.

The president's comments came after Navy forces took over a 75 mile (120 km) stretch of the rail line, located in the Gulf coast state of Veracruz.

Controlled by tycoon German Larrea, Mexico's second-richest man, Grupo Mexico blasted the takeover as an "expropriation."

Larrea is also a frontrunner for the purchase of U.S. Citigroup Inc (NYSE:C)'s retail banking arm in Mexico, Citibanamex, a deal some analysts now say could be at risk.

The Inter-Oceanic Corridor aims to modernize freight cargo transport between the Pacific and Gulf coasts through the Isthmus of Tehuantepec, Mexico's narrowest point, to create a trade route that could eventually rival the Panama Canal.

"We are always looking to reach agreements," Lopez Obrador said at a press conference, insisting that the government had merely withdrawn a concession because the area is "strategic."

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The president said Grupo Mexico has proposed a government payment of more than $534 million. Grupo Mexico would not confirm the figure.

Shares of Grupo Mexico's transport unit closed down more than 4% on Monday, although services on the line have continued normally.