MEXICO CITY – Mexico announced on Wednesday it will build a US$1.27 billion tunnel that will be almost 39 miles (62 kilometers) long and 7 yards (meters) in diameter, to help solve the centuries-old drainage problem of the nation's capital.

Mexico City is sinking because of groundwater extraction, and is vulnerable to flooding because it sits in a mountain-ringed valley with no natural exit for rainwater.

President Felipe Calderón said that the tunnel will be the largest of its type in Mexico, and one of the biggest and most expensive public works projects of his administration.

The city already has some large underground drainage tunnels, but they are aging and vulnerable to heavy storms.

Mexico City is largely built on the soft soil of a former lake bed, and has been hit by periodic floods since it was founded by the Aztecs in 1325.

The Aztecs built dikes to try to keep out flood waters. After the Spaniards conquered Mexico in 1521, the lakes were drained and the first rudimentary drainage channels were built.

Because the city is sinking, the existing tunnels no longer dislodge water by gravity. Instead, the waste water – a mixture of raw sewage and runoff – must be pumped out of the valley. The new system would help to remedy that.