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Nicaragua canal fast-tracked with Chinese boost

Published June 8, 2013 9:21 pm

Central America • Critics question the plan's viability.
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Managua, Nicaragua • For centuries, tycoons and adventurers alike have dreamed of building a canal through Nicaragua between the Pacific and Atlantic oceans and riding a boom in international trade to new riches. Up until now, however, all comers were forced to admit defeat when faced with the sheer challenge of building a man-made river through dense, hilly jungle.

Now, the old dream is attracting a new hopeful, and this time from the other side of the world.

The Chinese company, HK Nicaragua Canal Development Investment Co. Ltd., is working with the Nicaraguan government on a massive canal project experts say could take 11 years to finish, cost $40 billion and require digging about 130 miles (200 kilometers) of waterway.

Canal proponents say the waterway could create 40,000 construction jobs and essentially double the per-capita gross domestic product of Nicaragua, one of the poorest countries in Latin America. The government plans to grant the Chinese company a concession for 100 years.

That's sparked hopes of an economic gold rush in Nicaragua, and President Daniel Ortega has pushed approval of the canal through the country's congress. Ortega presented the canal proposal Tuesday and hopes to submit it to at least an initial vote on Monday, with final approval planned by next Thursday.

"This is a question of a project that is very important for the country, and that is why it is being given urgent priority," said congressional leader Rene Nunez, an Ortega supporter.

The opposition Sandinista Renovation Movement, which split in 1995 from Ortega, has tried to slow down the debate by demanding more information about the developers, while other critics have questioned the plan's viability just a few hundred miles northwest of the Panama Canal.

The Chinese company's director, Wang Jing, is also listed in the same role in 12 other existing or dissolved Hong Kong companies.

"If this information isn't forthcoming, we can assume this is a swindle, a deal with a front company to get a concession, and then sell the rights to someone else," the renovation movement party said in a statement. "It's a corrupt deal to make a lot of money with fake investors."

Just as the Panama Canal was a projection of growing U.S. power at the start of the 20th century, the Nicaragua project already reflects China's influence and financial clout around the world. Another Hong Kong-based company has been operating port facilities on both ends of the Panama Canal.

The Nicaraguan canal's construction would mark the end of a long push that began at least as far back as the 19th century when U.S. industrialist Cornelius Vanderbilt won the right to build the waterway but gave up amid political turmoil.

Other U.S. interests then studied building a canal in Nicaragua before settling on Panama as the crossing point.

This time around, critics have been asking whether Central America needs two canals, even in an age of growing world trade.

"Forty billion dollars is an extremely high amount and based on my experience and the studies we have done on world trade flows, the amount of traffic that would be needed to pay for a project of this size doesn't exist," said Eduardo Lugo, a Panamanian private consultant who's worked on traffic-demand calculations on the ongoing Panama Canal expansion.

Jason Bittner, director of the Center for Urban Transportation Research at the University of Southern Florida, said the demand will probably be there by the time the Nicaragua project is finished. Still, any new waterway would have to compete with the Panama Canal and the "land bridge" of railway networks that connect U.S. West Coast ports with the East Coast.

"I don't anticipate there being any reduced demand in trade between the global trading partners, so East Asia and the eastern United States will continue to have significant trade," Bittner said. "If you make this large public sector investment, it will be used, as long as it's priced properly, as long as the Panama Canal isn't significantly undercutting it."

Finding enough customers may turn out to be the least of the Chinese company's worries in a country that doesn't even have a paved road connecting its Pacific and Atlantic coasts.

For example, much of Nicaragua's water is earmarked for human use, and its lush rivers are too environmentally sensitive to be simply dredged into waterways or dammed to provide water to operate locks. Panama faced few such restrictions in the early 1900s when its canal was built.

In a previous version of the project presented in 2006, the promoters acknowledged they would probably have to build some dams, perhaps on rivers as sensitive as the San Juan, which runs along the border with Costa Rica.

In fact, the builders may have decided to eliminate a lot of digging by routing the canal through that river, according to a 2012 statement by Royal HaskoningDHV, a Dutch firm hired to do technical studies. That option had been written off in earlier proposals as too conflictive.

In 2011, Nicaragua and Costa Rica came close to an armed standoff over Nicaraguan dredging of the river to improve navigation. The World Court ordered both countries to withdraw armed forces from the area.

With 1.7 billion gallons (6.6 million cubic meters) of water per day needed to run Nicaragua's proposed locks, and tens of millions of tons of excavation needed, the project certainly looks daunting. Bittner noted that it matched the challenges of other mega-construction projects such as the Three Gorges Dam in China, which nonetheless took years and huge investments to complete.

"It is really not that much different from cutting the original Panama Canal," Bittner said. "I mean these things that we have done, the entire interstate highway system, these are massive projects that, if you were trying to put a lens to them, and say 'we can't get this because they're so massive,' we probably wouldn't have done them, but nonetheless, there they sit."

In big ways, the proposed waterway outmatches the challenges of building the Panama Canal, which took 10 years and cost the lives of about 5,600 workers. According to the 2006 project details, Nicaragua's canal would have to be more than three times longer than Panama's, which cuts through Central America's narrowest point.

Lugo said the canal's length, would make the project less competitive.

"It's very long, both to dredge it and maintain it," he said. "That is going to require high maintenance costs."

Promoters point to advantages such as the incorporation of huge Lake Nicaragua into the crossing. Once inside the lake, big oceangoing freighters could travel about 50 miles (80 kilometers) before passing through a pair of locks, and into a waterway dug across the waist of the country to the low, swampy Atlantic coast.

Panama, which already has a steady income flow from its canal, thought long and hard before embarking on its seven-year, $5.2 billion expansion project, scheduled to be finished next year, to allow larger ships to use its waterway.

Nicaragua, on the other hand, has been rushing in despite the doubts. Its canal's promoters argued in their 2006 presentation that they could capture 4.5 percent of world maritime freight traffic and notch a 22-percent profit margin by 2025, though their cost estimates at the time were much lower than that of the project presented this week.

The Chinese company has said it would wait until the National Assembly votes to express an opinion, adding in its statement that it is willing to fully study the project's technological, economic, environmental and social impacts.

"Our intention is to build a world-class project, with high standards," the firm said.

In the end, President Ortega's allies control the national legislature, which means the Chinese company will likely win their concession this coming week.

All along, Ortega's allies have sold the canal as a desperately needed economic boost.

"I think it is urgently necessary to solve problems like unemployment and making Nicaragua more attractive to investors, and that's why we should approve this speedily," said Erwin Castro, a congressman from Ortega's Sandinista Front.

Opposition congressman Luis Callejas said lawmakers were only asked to discuss the bill Friday with a vote scheduled just three days later.

"I do not understand what the rush is," Callejas said. "It's such a sensitive topic that the population should be consulted." —

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