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Nicaragua is making small steps forward on its plan to construct a major canal that would run through the middle of the country, connecting the Pacific Ocean with the Caribbean Sea.

On Dec. 1, the Nicaraguan government announced it is seeking local subcontractors to take on the project as feasibility studies continue. The government said the US$40 billion channel would take 10 years to complete and would offer an alternative trade route to the Panama Canal, the current path for ships in the region that was completed in 1914. Resurrecting a dream five centuries in the making, the plan was approved in June, despite protests from environmentalists, indigenous groups and neighboring countries.

The construction of the canal will rely entirely on private funding from a Hong Kong-based company headed by Wang Jing,  an enigmatic businessman “of undetermined wealth.” Wang, a telecommunications tycoon, is on the board of 20 other companies in 35 countries. Nicaragua President Daniel Ortega cited Wang’s success in former endeavors when he gave him exclusive rights to the project for at least the next 50 years. Wang and his company, named HK Nicaragua Canal Development Investment Co. Limited (HKND Group), have been accused by some opposition politicians of acting as a front for the Chinese government, a charge the company has denied.

HKND said in a statement that its research shows the canal would more than double trade in the country after its planned completion in 2020. “The total value of goods transiting the combined Nicaragua and Panama canals could exceed US$1.4 trillion, making this one of the most important trade routes in the world,” it said.

If constructed, the canal would fulfill a longstanding dream for many Nicaraguans, as the country was considered multiple times for a passageway linking the Atlantic and the Pacific, starting in the 1500s when Spanish explorers had imagined a waterway there. Tim Rogers, a journalist based in Nicaragua said the majority party, the Sandinistas, is using the past to appeal the project to citizens.

“They’re touting this project as a game-changer for Nicaragua,” Rogers said. “They’re playing with people’s historic frustration with not being able to ever get this project forward. Nicaragua has been talking about this for hundreds of years.”

A recent poll conducted by Sandanista think-tank Consultora Siglo Nuevo showed 74 percent of Nicaraguans consider their primary concern in life the “lack of employment,” making the economic promises of this project more appealing. Another poll conducted by the same group showed that 71 percent of Nicaraguans support the canal.

Rogers said support for the project is divided along partisan lines. Those who support the president and his Sandanista party are in favor of canal; those who do not support them oppose it.

“People who are critical of the government say this seems far-fetched at best, and at worst this could be a complete disaster,” he said. “It could be an ecological disaster for the country, and it could also be a political disaster. It could comprise Nicaragua’s sovereignty by giving this giant swath of land to an unknown Chinese businessman.”

The biggest risks being discussed are related to the environment. The exact layout of the new waterway has not been determined, but all proposed routes go through Lake Cocibolca, Nicaragua’s largest source of fresh water.

“We’re at a crossroads because either you use Lake [Nicaragua] for floating boats or you use it for drinking water, but you can’t use it for both things at once,” Victor Campos, the assistant director of The Humboldt Center, an environmental organization, told the Associated Press.

The government has said it will address concerns that the canal would destroy Nicaragua’s watershed in feasibility studies that are currently underway.

The canal will also likely go through protected indigenous land, a concern indigenous Congressman Brooklyn Rivera expressed when the plan was originally passed.

“The indigenous people are not opposed to development, but development has to include our communities,” he said. “The Rama people have not been consulted on this, nor has the territorial government of indigenous people living in Laguna de Perlas. Those two indigenous territories lay right in the path of five of the six proposed canal routes. This project talks about expropriation of communal territories of the indigenous, and that affects the existence and rights of the indigenous people. We can’t approve of this concession without information about it, and this law can’t substitute the legally established rights of the indigenous under Law 445.”

Nicaragua CanalConcerns about indigenous rights and the environment aside, others doubt the logistical plausibility of such an enormous undertaking and neighboring countries have expressed opposition to the project.

In November, the International Court of Justice ruled that Nicaragua “abstain from any type of dredging or other activities” on the border of Costa Rica. Panama’s foreign minister said in an interview in Washington D.C. last week that there is “no chance” the project will be finished once studies of plausibility are done. “We are absolutely sure that there will not be a canal built there,” he said.

“They haven’t presented any scientific data,” Rogers said. “There’s no feasibility studies, technical studies, or environmental impact studies. The conversation right now is based on wild expectations, hopes and fears. Not on solid information.”

Others speculate there is not enough need to justify the construction of a new canal, since the Panama Canal announced in 2006 it would be expanding to allow bigger ships. The Panama Canal will finish its expansion next year, and some say that is all that will be needed for maritime traffic in the region. However, Nicaragua and the HKND Group claim the demand will increase in time for the new canal’s completion.

“In the years since the Panama Canal expansion was announced, maritime trade has continued to grow, only temporarily abated by the recent economic slowdown,” a statement on HKND’s website said. “Both trade volumes and ship sizes have continued to grow and signs suggest that the Panama Canal by itself may be insufficient to meet the requirements of 21st century global trade.”

Rogers said of these statements: “They’ve got numbers and data, but I don’t know how real any of them are — this could be stuff they’re just making up to justify this.”

Preliminary feasibility studies released by the government on Dec. 1 said the project would be beneficial to Nicaragua in many ways. In an interview with Nicaragua news channel Canal 4, Paul Oquist, the Secretary of Public Policies of President Ortega explained the study’s result.

“The environmental and social impact of the construction of the Great Nicaraguan Interoceanic Canal would be positive due to mechanisms and measures that exist to guarantee the success of this work,” he said.

More studies are expected to be released in December and throughout the coming year.

China has virtually no relationship with Nicaragua, making this project particularly unique. In October, Ortega and a group of 21 academics, politicians and businessmen went to China to discuss the project, the first visit from Nicaragua delegates to Mainland China since Nicaragua switched diplomatic recognition from Beijing to Taipei in 1990.

“This relationship is totally foreign, and new, and we don’t know who we’re dealing with,” Rogers said. “The Chinese don’t invest in Nicaragua, there are no diplomatic ties, and there are no political ties. So China is a complete unknown. It hasn’t been a player at all with Nicaragua in the past.”

China’s influence is growing in Central America. In 2009, Costa Rica signed a trade agreement with China, making it the first country in the region to reject ties with Taiwan. The deal was made in exchange aid and projects from China. The country promised a highway, an oil refinery, and a soccer stadium.

“The only part of that that panned out so far was the soccer stadium. Everything else is totally behind schedule,” Rogers said. “There’s still sort of this promise that this relationship will lead somewhere, but most Costa Ricans would say that all they got out of it was a soccer stadium.”

Questions remain as to whether Nicaragua’s big plans will turn out the same way, but it is clear these projects represent China’s transition to become a major player in the region.

“China is sort of stepping in and filling a void that the U.S. left,” Rogers said. “The U.S. has been withdrawing from the region since the 80s. If anything, China’s move into the region might make the U.S. pay attention to the area.”

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