The Joplin Globe, Joplin, MO

Business

June 11, 2013

Nicaragua rushes on for canal deal with Chinese

MANAGUA, Nicaragua — Nicaragua is plowing ahead with a plan to dig a Chinese-funded rival to the Panama Canal across the midriff of the country, fast-tracking a proposal through the ruling party-controlled congress despite a lack of details about the $40 billion project.

A China-based consortium says it will finance the project and turn over control of the infrastructure to Nicaragua in exchange for a majority of the earnings, which it would share with the Nicaraguan government.

Proponents have said the project could capture 4.5 percent of world maritime freight traffic and double the per-capita gross domestic product of Nicaragua, one of the poorest countries in Latin America. The canal has won the enthusiastic backing of President Daniel Ortega, whose Sandinista Front controls the national legislature with 63 out of 92 lawmakers.

Many outside observers and Ortega opponents point out that nearly every key detail of the project remains a mystery, from the sources of its funding to Nicaragua’s share of the profits to the route it would take between the Caribbean and the Pacific. Many have been asking whether Central America needs two canals, even in an age of growing world trade.

The Nicaraguan congress’ infrastructure committee voted unanimously Monday night in favor of the project, with four opposition lawmakers on the 12-member body abstaining. Committee president Jenny Martinez said the bill was immediately sent to the National Assembly, which is expected to approve it Thursday.

Feasibility studies have indicated six potential routes across Nicaragua, many connecting with Lake Nicaragua in the western half of the country, but the legislation approved Monday does not specify which one would actually be dug.

“Since there is no defined path, we can’t measure the degree of seriousness of this project,” said opposition lawmaker Javier Vallejos. “This is like putting the cart before the horse.”

Ortega also hasn’t presented an economic feasibility study or an environmental impact study for the project. He said last month that it would start in Bluefields Bay in the southern Caribbean coast, go through the center of the country and into Lake Nicaragua and stop at the southern Pacific coast.

The project would include digging about 130 miles (200 kilometers) of waterway, and proponents say it could create 40,000 construction jobs over the 11 years estimated for completion.

The government plans to grant the Chinese HK Nicaragua Canal Development Investment Co. Ltd. a concession for an initial 50 years, with the possibility of extending it another 50.

Jaime Incer, an environmentalist and adviser to the presidency on environmental issues, said authorities should be defining a specific route for the canal before approving a concession.

“There are at least six proposed routes and five of them include Lake Nicaragua, but there is nothing definite, that’s all part of the unknown,” he said.

Deputy Foreign Minister Manuel Coronel, who is chairman of the country’s Grand Canal Authority, said Monday that he had no doubt the Chinese company would carry out the project.

“It’s a very serious company, very responsible and recognized,” Coronel said. “To doubt (the company) is to oppose the project for political rather than realistic issues.”

The Hong Kong-registered company has said that it is willing to fully study the technological, economic, environmental and social impact of the project.

“This is a great project that has the potential to transform international trade and bring significant economic and social benefits to Nicaragua, their neighbors and Latin America,” company spokesman Ronald Maclean-Abaroa said Monday on the group’s website.

Under the deal, the Chinese company would pay Nicaragua $10 million annually during the first decade, then pay it a share of canal revenues — an amount that would begin at 1 percent and rise to an unspecified percentage over the life of the concession. After completing the concession, the Chinese company would have to turn over to Nicaragua all buildings and other canal infrastructure.

Jose Aguerri, who heads an association of Nicaraguan chambers of commerce, said the lack of details released about the project would slow investment.

“Until you define the path that the canal will have, it will be difficult to attract investment to the area because there is no legal certainty,” Aguirre said after meeting with committee members.

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 a waterway across the country 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.

Panama is nearing the end of a seven-year, $5.2 billion expansion project to allow bigger ships to use its waterway. That project is scheduled to be finished next year.

 

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