Almost exactly two years ago, I wrote in this column about Nicaraguan president Daniel Ortega's signing a 50-year concession granting the Hong Kong Nicaragua Canal Development Investment Co. (HKND) the right to plan, design, construct, and operate a canal between the country's Pacific and Caribbean coasts. This ambitious project supposedly would cost $50 billion and require the excavation of 125 miles of new waterway. In addition to the canal, construction would include two ports, two airports, a pipeline, and a cross-country railroad.
Besides the almost overwhelming scope of the project, three things about it are of particular interest. First of all, HKND is a Chinese company, which raises suspicions in many minds that the Beijing government has a finger in the pie. Second, the owner of HKND, Wang Jing, has a background in telecommunications, not canal building. And finally, no one has the vaguest idea where the financing would come from. Wang claims to have a number of investors but has not identified a single one. Most dubious of all is his stated commitment to have the project completed in 2020. Keep in mind that the Panama Canal expansion, begun in 2007, is not scheduled for completion until next year. The idea is not a new one. As far back as colonial New Spain, the concept of building a canal across Nicaragua has been studied, plotted out, and even started several times only to be abandoned. Frankly, by now I thought the project would have quietly gone away. However, on Dec. 22, 2014, an official groundbreaking was held, and a small amount of construction has taken place. Even more significantly, on May 31, 2015, HKND presented to the Nicaraguan government an Environmental and Social Impact Assessment report prepared by the British company Environmental Resource Management (ERM). As for the specific findings of the report, none of the details have been released. A statement issued by HKND simply noted that the report, which consists of 14 volumes, 11,000 pages, and 2.75 million words, "covers a wide range of scientific disciplines including geology, soil, groundwater, surface water, air, noise, freshwater and terrestrial ecosystems; while the social studies cover social resources, community health, and cultural heritage; together with local economy and employment." The Grand Canal Authority says that the next step will be to submit the findings to the Environment Ministry.
Whatever the conclusions are, there is almost no one who doubts that this canal would have a disastrous impact on Nicaragua's environment. Hundreds of thousands of words have been written about the threat to pristine rivers, lush jungles, and endangered wildlife. There is, of course, the political reality that if Daniel Ortega wants it to happen, it will. The major uncertainty involves the financing. Will $50 billion be enough, and if such an amount is available, will it come from entities that we would rather not see gain a strong foothold in Central America? The larger question is do we really need another canal? Certainly, there are some compelling reasons to have a second canal across the Americas. Obviously, the threat of terrorism always hangs over our heads, and the loss of the Panama Canal would create an almost unimaginable global shipping crisis. From an operational perspective, the canal could open up more routes for the new "superships." In early June, Maersk announced an order of 11 second-generation Triple-E ships. As of today, they are too large for any port in North America and will be too large to traverse even the enlarged Panama Canal. Finally, the new canal would pump up the Nicaraguan economy. Estimates are that it would double the per capita GDP of the country.
Even so, while I will stop short of calling the project impossible, based on what we know now, I think it is highly improbable.
Gartner, Inc.
