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Nicaragua Fast-Tracks Historic Project

The country is trying to revive a centuries-old dream of linking the Pacific to the Atlantic.

Mon June 17, 2013 - National Edition

MANAGUA, Nicaragua (AP) Nicaragua is trying to revive a centuries-old dream of building an inter-ocean canal, a project experts say could take 11 years to build, cost $40 billion and require digging about 130 mi. (200 km) of waterway.

The government is seeking to rush approval of a canal linking the Pacific to the Atlantic through the country’s congress in less than two weeks in a nation that doesn’t even yet have a paved road connecting the two oceans. And some congressmen are asking why there’s such a rush, calling for a cool head and a careful consideration of costs and benefits, both environmental and economic.

Nicaraguan President Daniel Ortega presented the project June 4.

Just as the Panama Canal was a projection of growing U.S. power at the start of the 20th century, the Nicaragua project is an expression of China’s growing influence and financial clout around the world. Some are concerned, however, that while China’s record in big infrastructure projects is solid, its track record on environmental sensitivity is unenviable.

The demand will probably be there by the time the project is finished, said Jason Bittner, director of the Center for Urban Transportation Research at the University of Southern Florida. The question is whether the route can compete with its two big competitors, the century-old 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," said Bittner. "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."

Nicaragua, like Panama, which is currently expanding its own canal to handle wider ships, has lots of water. But 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 presentation of the project presented in 2006, the promoters acknowledged there would probably have to be some dam-building, perhaps on rivers as sensitive as the San Juan river, which runs along the border with neighboring Costa Rica.

With 1.7 billion gal. (6.6 million L) of water per day needed to run Nicaragua’s proposed locks, and tens of millions of tons of excavation needed — the canal will be 200 ft. (60 m) deep in places — the project looks daunting.

But Bittner noted that these projects usually do.

"Certainly in scope, in technology even just the effort of doing so, it is really not that much different from cutting the original Panama Canal," he 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."

There are key differences: according to the 2006 project, Nicaragua’s canal would have to be more than three times longer than Panama’s, which cuts through Central America’s narrowest point.

But a 2012 statement by Royal HaskoningDHV, a Dutch firm hired to do technical studies for the new proposal, suggests the builders may have decided to eliminate a lot of the digging by routing the canal through the environmentally and diplomatically sensitive San Juan river, which runs along the border with neighboring Costa Rica. That option had been written off in earlier proposals as too conflictive.

In 2011, the two Central American countries came close to an armed standoff over Costa Rica’s complaint about Nicaraguan dredging of the river to improve navigation. The World Court ordered both countries to withdraw armed forces from the area.

And then there’s the question of economics.

Eduardo Lugo, a Panamanian expert who worked for 10 years on traffic-demand calculations for Panama’s own expansion effort and now works as a private consultant, said the length would tend to make the project less competitive.

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

The Nicaraguan canal’s promoters argued in the 2006 presentation, whose calculations would now probably have to be set back seven years, that they could capture 4.5 percent of world maritime freight traffic and earn 22-percent profits by 2025, though their cost estimates at the time were much lower than the project presented.

Promoters say the Nicaraguan canal has a key advantage: it’s not all artificial. The huge Lake Nicaragua sits separated from the Pacific by a thin strip of land; once inside, big oceangoing freighters could travel about 50 mi. (80 km) on the lake’s waters before going through a pair of locks, and into a waterway dug across the waist of the country to the low, swampy Atlantic coast.

Still, Lugo noted, "this is a huge project that has a lot of engineering and construction challenges. It would have very high costs and these projects are basically carried out based on returns on investment.

"But $40 billion 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."

Panama, which already has a steady income flow from its canal, thought long and hard before embarking on a 7-year, $5.2 billion expansion project, scheduled to be finished next year, to allow larger ships to use its waterway.

Nicaragua, however, is rushing in. In 2006 proponents said freight traffic demand would outstrip the capacity of even the expanded Panama canal by more than 300 percent by 2025. They say the waterway could create 40,000 construction jobs and essentially double the per-capita GDP of Nicaragua, one of the poorest countries in Latin America. The government plans to grant the Chinese company a concession for 100 years.

Hong Kong-registered company, HK Nicaragua Canal Development Investment Co. Ltd., has an office in the Nicaraguan capital. It said it would wait until congress votes on it to express an opinion. The company said in a statement that it is willing to fully study the technological, economic, environmental and social impact of the project.

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

The director, Wang Jing, is listed as being a director of 12 other existing or dissolved Hong Kong companies.

The opposition Sandinista Renovation Movement demanded more information about the developers.

"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 party said in a statement. "It’s a corrupt deal to make a lot of money with fake investors."

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

"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.

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

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