Jonathan Watts, The Guardian, June 12, 2013
Nicaragua’s parliament is due to vote on Thursday on one of the biggest infrastructure projects in Latin America’s history – a trans-oceanic canal that is to be built and run by a Chinese company.
If it goes ahead, the $40bn (£26bn) scheme, which is twice as expensive as Brazil’s Belo Monte dam and likely to be three times longer than the Panama canal, looks set to transform global shipping and jump start the economy of this Central American nation.
As well as the waterway, the draft agreement between Nicaragua and a Hong Kong registered firm — Nicaraguan Canal Development Investment Co Limited – includes provisions for two free trade zones, an airport and a “dry canal” freight railway.
“This will be the largest project in Latin America in 100 years,” Ronald Maclean, the executive fronting the operation in Managua told the Guardian. “If Nicaragua gets to do this, it is going to be a transformational project not only for Nicaragua but for the region.”
Given the government’s large majority, parliamentary approval is expected to be a formality, but critics warn the plan is being rushed through without adequate scrutiny of the environmental impact, business viability and public well-being.
A one-year viability study is now under way and the operators soon plan to tap international financial markets in New York, London and Tokyo for investment in a scheme that they say will be entirely privately funded. President Daniel Ortega is also said to be promoting the scheme in meetings with ambassadors from Brazil, Saudi Arabia and Canada.
Although hydro-engineering techniques have advanced considerably since the 48-mile (77 km) Panama canal was completed in 1914, the logistical challenge will be enormous. The new canal, which will pass through a much wider stretch of land, is likely to be more than 250km long. It will also be much wider to allow passage by the biggest container ships. The project will be operated by HKDN — a Hong-Kong based firm set up last year that has established a holding company in the Caiman Islands. It will pay $10m a year for 10 years to the Nicaraguan government.
Bigger benefits are expected in the wider economy. Paul Oquist, secretary of public policies of the presidency of the republic, said the Great Interoceanic canal will allow Nicaragua’s GDP to double and employment to triple by 2018.
Legislators have complained that congressional committees had only two days to review a bill that could shape the country for a century.
“Given its complexity, the length of the concession and its importance for all Nicaraguans, this project deserves to be fully discussed and explained, seeking the broadest national consensus,” noted the Nicaraguan Foundation for Economic and Social Development, an independent think-tank. “How can we as Nicaraguans be sure that the conditions stipulated in the bill are the best that could have been achieved?”
Details of the possible route have yet to be disclosed, though it is thought likely that it will run through Lake Nicaragua, the most important source of freshwater in the country and a home to sharks and numerous other species.
Jaime Incer, a renowned environmentalist and presidential adviser, urged caution. “There are alternatives for linking one ocean to the other, but there are no alternatives for cleaning a lake after a disaster has happened. We don’t have another Lake Nicaragua,” he told the Confidencial newspaper.
Indigenous groups also say they have not been adequately consulted.
The operator says it has hired one of the world’s leading consultancies, Environmental Resources Management to conduct impact assessments: “HKND Group has committed to develop the project in a manner that conforms with international best practices, delivers significant benefits to Nicaragua and its people, generates local job growth and economic development, honours the local population and heritage of the country, and serves the best interests of Central America and, indeed, the world.”
But little is known of the group behind the project, which is headed by Wang Jing, the head of one of China’s biggest telecom firms Xinwei. It is unclear whether he has any experience in the field of hydroengineering, shipping or infrastructure, but earlier this year his company signed an agreement with the state-owned China Railway Construction Company, and Jing has met senior leaders in Beijing, including president Xi JInping.
Margaret Myers, director of the China and Latin America programme at the Inter-American Dialogue, said Wang’s involvement did not necessarily mean the involvement of the Chinese government.
“The extent to which this project will increase ‘China’s’ influence in the region and on global trade routes is unclear. This would depend on a wide variety of factors, including HKC’s connections to the Chinese government and who else, if anyone, decides to invest in the project,” she wrote.
The Nicaraguan government was due to be a 51% shareholder in the projects, according to preliminary legislation passed last year. There is no mention of this in the latest bill, but Maclean said there has not been a change.
“I think it involves a gradual transfer from the company to the government over the life of the concession and that eventually the government will own the canal,” he said.
Opposition lawmakers said immunity, tax breaks and other preferential treatment for foreign investors in a still-to-be determined project was a violation of nation sovereignty.
The Sandinista Renovation Movement said it would oppose the bill and “any document that gifts a concession, privileges, exonerations and tax exemptions to an unknown company, for an unknown route, for a period of 100 years.”
“We are going to hand over the country’s sovereignty without knowing where the canal is going to go, how much it is going to cost, its ecological impact or how long its construction is going to last,” Independent Liberal party legislator Eliseo Núñez, told La Prensa.
Additional reporting by Gareth Richards in Manaus