Nicaragua: China's Canal in Latin America

During a 2013 demonstration against the canal, protesters carry a banner that reads "Ortega Vendepatria" which translates to, "Ortega sold our home," referring to Nicaraguan President Daniel Ortega. (Photo: Jorge Mejía Peralta)

In Nicaragua, a dream nearly as old as its independence is finally in development. In December of last year, the country celebrated the groundbreaking of a new canal connecting the Atlantic and Pacific oceans. The "Great Nicaragua Canal" will be a rival to the famous Panama Canal and yet another bridge between two rising international players: Latin America and China.

Nicaraguan President Daniel Ortega's government says the canal will provide many local economic benefits, including an end to extreme poverty and unemployment via an estimated annual growth of 10 percent. He added that the $50 billion project will open a new era for a "more sovereign" and "interconnected" country. But what are the implications of its competition to the already established Panama Canal? And how far can the term "sovereignty" be used when the project is foreign funded?

Panama's response

It is no surprise that Panama is the first to voice its concerns over the feasibility of a second channel in the Americas. "It's easier to get to the moon than to build Nicaragua's canal," said former Panamanian Foreign Minister Fernando Núñez Fabregas. Concerning the project's $50 billion budget, he added, "I think for that money we can make a road from here to London."

Núñez Fabregas added that two natural circumstances could stand in front of Nicaragua's plans: earthquakes and hurricanes. "If they do it with a system of locks, every time a ship passes the Panama Canal, 54 million gallons of fresh water goes to sea, but to keep those 54 million it has to be sealed. If they have an earthquake, they will close the doors. And if you're driving a boat full of oil and go for the Nicaraguan canal, maybe the other side awaits a hurricane. Do you know how hard it is to handle a boat of that type in a hurricane? It is impossible."

The Nicaraguan government has yet to respond to these concerns. Smithsonian investigator Robert Stallard said, "It is probable that we will see much more powerful hurricanes than any that has hit Panama." For example, the reoccurrence of a storm like Hurricane Mitch, which killed more than 3,800 Nicaraguans in 1998, could provoke the canal's overflow, mudslides and the destruction of dams. Local communities, transport infrastructure, electrical lines and the environment in general would be in jeopardy. "We have a lack of information and a potentially great threat to our environment," Jorge Huete-Pérez, vice president of Nicaragua's Academy of Sciences, added, expressing his theory that "the government only wants things to go forward."

Nicaragua seems to be prioritizing economic benefit over feasibility and safety issues. Balance is often a challenge for a developing country. As China itself aims to move from developing-country status to world power, a Nicaraguan canal demonstrates geostrategic motives.

China's give and gain

When it comes to fostering relations with developing regions, China is not just talk. Besides digging the canal, the Hong Kong Nicaragua Canal Development Investment Group (HKND) plans to construct roads, two maritime ports, an artificial lake, an airport, a tourist resort and a free-trade zone, as well as steel and cement factories. This will also include providing the more than 1 million tons of explosives, 1,000 trucks, 1.5 million tons of steel and the creation of an electrical plant needed for the operation. Most significantly, while the waterway will be longer, it will be a deeper and wider alternative to the famous Panama Canal, which has potential for global trade alliance diversification.

In order to accomplish this aspiration, the HKND Group holds a 50-year concession for the rights to develop the canal, which will require approximately 10 years to make it operational and another 50 years to manage it. Leading the company is Chinese billionaire Wang Jing, a private entrepreneur who will lead the construction efforts and financing channel, despite having no experience in large infrastructure projects. With a project whose value is five times the size of the Nicaraguan economy, the logistical viability is still in doubt. Consequently, suggestions that Beijing is the real financer behind Wang Jing have become understandable.

Over the last decade alone, the Asian giant's investment in Latin America has increased exponentially. Latin American exports to China—including agricultural products and precious metals—rose from $11 billion in 2003 to nearly $106 billion in 2013. According to the International Monetary Fund, this boosted China's share in the region's exports by roughly 1,000 percent, while the U.S. share dropped.

China is working hard to further meet the demands of its Latin American and global commercial advancements. One noteworthy sign is that Chinese maritime vessels are being constructed larger, by an estimated annual rate of 3 to 4 percent. This has led to some of these mega-ships having to navigate around South America through its hazardous southernmost Tierra del Fuego point, all because they were too large for Panama's canal. And regardless of Panamanian lock additions in recent years—resulting in 13.7 meters in depth and 90 to 300 meters in length—Nicaragua is still projected to more than double both measurements.

The big picture

China is proving itself a rapidly growing and diversifying global trade partner. And as a pragmatic business magnet, in geopolitical terms, the presence of a second waterway in the Western Hemisphere would ensure a smooth trade flow. It is also worth noting that the new Nicaraguan canal could be of further strategic importance to Beijing, in that it would allow passage of their warships or prevent a NATO country from closing a seaway to Chinese interests during future diplomatic crises. China is no different from other world powers in being driven by self-interest. When the United States committed to build the Panama Canal between 1904 and 1914 after France failed, it was for similar reasons. One could say the same for when France constructed the Suez Canal in Egypt.

Endeavoring to strengthen its global position and security, China finds a willing partner in Latin American countries such as Nicaragua that seek foreign investment. The relationship serves both.

Ailana Navarez is a writer, photographer and political analyst with a concentration in Latin America. She is pursuing a major in government with a specialization in international relations and a minor in psychology at Harvard Extension School. She is a South America regional specialist for Pulsamerica (a U.K.-based Latin America analysis firm) and has been featured in several international magazines and news outlets, including Telesur, Mercury Magazine and Casa Rosada.

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