Nicaragua’s Chinese Canal: Behind the Audacious $40 Billion Bid to Build a Rival Panama Canal

The Nicaraguan government muscled into law a 50-year concession allowing a Chinese company to handle the Great Nicaragua Canal megaproject, which is estimated to cost $40 billion

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Esteban Felix / AP

People push a boat into Lake Nicaragua, near Granada, Nicaragua, on June 7, 2013

More than 150 years ago, U.S. businessmen and politicians plotted the creation of a canal through the isthmus nation of Nicaragua that would link the Pacific and Atlantic Oceans. Now, according to Nicaraguan officials, what Americans like the powerful Vanderbilt family (and later former President Theodore Roosevelt) once dreamed, a Chinese consortium intends to make real.

On Thursday afternoon, the Nicaraguan government of President Daniel Ortega muscled into law a sensational 50-year concession that grants a little-known private Chinese company the authority to “design, develop, engineer, finance, construct, possess, operate, maintain and administer” the Great Nicaragua Canal megaproject. Estimated to cost $40 billion, it includes an interoceanic canal, an oil pipeline, an interoceanic “dry canal” freight railroad, two deepwater ports, two international airports and a series of free-trade zones along the canal route. The canal would be at least twice as long as the Panama Canal and wider in order to accommodate the newest generation of supertankers. An executive representing the enterprise suggested that it would be the biggest such project in Latin American history.

(MORE: Caribbean Crisis: Can Nicaragua Navigate Waters It Won From Colombia?)

No information has been made public about the proposed route of the Nicaragua Canal, the timeline for its construction, its potential environmental impact on the country’s delicate tropical ecosystem, or who will finance the project. Ortega’s Sandinista government insists the project will be a game changer for the country and the region. Paul Oquist, Ortega’s private adviser for national development policies, says the canal project will allow Nicaragua to double its economic growth to double digits and triple the country’s formal employment within the next four years. The government claims the project would eradicate poverty in the hemisphere’s second poorest country and would be nothing short of a “social and economic revolution,” says Oquist.

The bill authorizing the concession was presented to Nicaragua’s Congress last week, just ahead of the meeting in California between President Barack Obama and his Chinese counterpart, Xi Jinping. Before arriving in the U.S., Xi had stopped at three countries in Latin America, including Mexico, lavishing the Middle Kingdom’s largesse with new construction contracts, energy deals and trade pacts. China is the fastest-growing investor in Latin America, with its state companies invested in billion-dollar projects across a part of the world that Washington has long seen as its backyard. The increasing size of China’s western-hemispheric footprint recently spurred the Obama Administration into diplomatic action. “The bottom line is that there has been a change in the environment of the Americas,” says Carl Meacham, director of the Americas program at the Center for Strategic and International Studies in Washington. “Now the U.S. has to compete.”

But Nicaragua is an unlikely beachhead for Beijing’s expanding geopolitical clout. The Central American nation is among a handful of countries that maintains diplomatic ties with Taiwan, which Beijing still considers a renegade province. The Chinese company that was granted the generous concession, HK Nicaragua Canal Development Investment (HKND-Group) — an enigmatic firm that was recently registered in the Cayman Islands and supposedly based in Hong Kong — doesn’t appear to have any direct ties to the Chinese government, nor any international experience managing infrastructure projects. Nor are there any immediate signs of Nicaragua following what Costa Rica did in 2007 and breaking ties with Taiwan in favor of new benefactors from the Chinese mainland.

(MORE: The Nicaraguan Firewall: How the Narco Gangs Have Breached It)

The company’s CEO, Wang Jing, is a Chinese telecom tycoon. On the website of his flagship cell-phone company Xinwei, Wang says his wireless company, which consequentially just received a full-service telecom concession to operate in Nicaragua, is dedicated to the “progress of the world civilization” and “will become a legend!” But other than his official bio, little is known about Wang. He has visited Nicaragua only once— a stiff, no-smiles photo op with President Ortega last September.

“Why Wang Jing? I really don’t know, but I would guess that no one else was willing to fund a project of this sort,” says Margaret Myers, director of the China and Latin America program at the Inter-American Dialogue. Myers says Wang is rumored to have government connections, but so far there is no indication that the Chinese government is interested in the project. “I haven’t seen the project referenced at all in Chinese official or social media,” she says.

At present, it’s unclear where a $40 billion investment — an amount greater than four times Nicaragua’s GDP — will come from. Ortega has been eagerly pitching the project to every government that will listen — from the Americas to Europe, Asia and the Middle East. But with few technical details to disclose, the pitch so far has rung hollow. HKND says it too hopes to attract additional funding from investors elsewhere.

(MORE: In Latin America’s Second Largest Rain Forest, an Indigenous Tribe Fights for Its Land)

Money isn’t the only concern. Environmentalists — including Ortega’s top environmental adviser — warn that the project could have disastrous consequences for the country’s water supply, including the massive Lake Nicaragua, considered a key source of drinking water for Central America in decades to come. Meanwhile, José Adan Aguerri, president of Nicaragua’s largest business chamber, warns that private-property owners will be “defenseless” against expropriations by the canal project. Until the canal’s route is established, everyone owning property in the indeterminately large canal zone that’s been penciled across the middle of the country is at risk of being expropriated — a legal uncertainty that may bring an instant chill to Nicaragua’s investment climate.

Civil-society groups also worry that Ortega’s Sandinista politburo and their new Chinese business partners intend to essentially create a privatized enclave in the middle of Nicaragua — one that will be governed for the next 50 to 100 years by their self-styled Canal Commission, regardless of which government is in power in Managua. “Nicaragua is not for sale. Nicaragua belongs to all Nicaraguans and is not the private property of Ortega and his family,” reads a declaration signed by 21 civil-society organizations.

But as questions surround the venture, so does cynicism. Nicaragua has long sought to leverage its unique geographic position, but political turmoil and shallow commitments have doomed more than a century of mooted projects to failure. It’s also worth noting the current Chinese backers won’t have the same drive and hubris as the Americans who built the Panama Canal — construction started there in 1904 only after Washington had meddled with regional politics and sent in a warship bristling with armed marines. “I’m skeptical,” says Eric Farnsworth, vice president of the Council of the Americas in Washington, referring to the proposed Nicaraguan megaproject. “There’s already a canal. The expense is going to be significant and success is far from guaranteed.”

MORE: The Obama Administration Looks to Latin America After Years of Neglect

61 comments
ManuelPrado
ManuelPrado

Also allow me to add that Panama a Colombian province at the time was granted Independence from Colombia in exchange for Nicaragua owned San Andrea Islands while occupied by North American politicians ... It is a fascinating history lesson and one that show as why the Nicaraguan govt isn't allowing for much debate (I am NOT a fan of Nicaraguan president) rather a get it done attitude that will move the projects forward,. At the end of the day this will allow a nation to rise above developing nation status.

LuwianMemories
LuwianMemories

I wonder - what about the geological condition of Nicaragua? Wasn't the original plan to build the canal in Nicaragua shifted to Panama because of the volcanic activity in Nicaragua?

CamiloErazo
CamiloErazo

its more likely that US take the first astronaut to mars than this idiotic president performing one of the biggest engineer projects in one of the poorest country in the world. Nicaraguans suck

tqsnju
tqsnju

Agree with your opinion! US is reckless like a young cowboy, while China is wise like an old fisherman. But everybody love US for his behavior is cool and very hollywood-styled.

POYairport
POYairport

@airlinegossip Somebody may yet wind up owning little more than a lot of malaria-infested Central American swamp land.

Vijay Banga
Vijay Banga

will help Nicaragua in development and economy

StephenSwain
StephenSwain

The beneficent Chinese built a new soccer stadium in San Jose, Costa Rica.  The only problem was they brought their own laborers, and bought their own materials, pretty much.  The Nicaraguans won't see as much benefit out of this deal as the Panamanians have done from their canal.  Count on it.

BobSheepleherder
BobSheepleherder

You'd think they would want to benefit the Chinese peasants with $40 Billion construction projects before Nicaragua.

RodrigoDuarte
RodrigoDuarte

@JoeyBaird Basically analyzing the law that was passed this week. It gives complete power to the consortium to do anything they want!

Aly DeSantis
Aly DeSantis

ohh yeah ...where to do find ur reporters ...time for a raise?

Aly DeSantis
Aly DeSantis

thank you for the article in the jun magazine...its very good insite into what is happening in the world and also into what our elected officials think and do!

Sandra Marsh
Sandra Marsh

Slowly but surely, eh Bethamy? Ever heard of Chinese sharks?? Gives me the willies!!

David Miles
David Miles

They could totally not do this without the power vacuum we've created by fighting stupid wars and wearing ourselves down with stupid debates about stupid ideologies.

essejohn1
essejohn1

While we, in the U S, spend trillions of dollars on fighting obscure wars in far away places, the Chinese are spending billions on investments and infrastructure in Latin America and elsewhere. Does not take a genius to figure out which is the best policy for the future of each nation. Dah !

SkipperSam
SkipperSam

Try 400 billion


The airports sea ports and railroad alone is 40-60 billion

FranciscoResto
FranciscoResto

damn all that for 40 billion? Thats pocket change for the Chinese. And to think that just one of those projects cost 40 billion for the US. Chinese labor is so cheap :0(

RegCliff
RegCliff

Reminds me of the Darien scheme, the Scottish plan to build the Panama Canal that ended in such a financial disaster that Scotland lost it's sovereignty to England. 

Not that I'm saying that's the case here, but it's an interesting piece of history.

lelandwi11iams
lelandwi11iams

US asleep on China and our huge trade deficit with them.  Until this is fixed, they will continue to camp on our doorstep.  Nix-Obama doing us in.

1Tekumut
1Tekumut

@TIME @TIMEWorld SHOWS AS HE HAS CHANGED BY FAKE MEETING WITH PROTESTERS BUT SAYING NOTHING NEW TO SOLVE PROBLEMS

ManuelPrado
ManuelPrado

Ironically enough the US govt had more to do with the decisioning than any geological condition in Nicaragua. The senate while voting was presented with an image of an active volcano on a postal stamp. Do recall that Nicaragua was on pace to become the 50th state of the union prior to being selected the site for inter oceanic canal. Hence a peasant uprising In Nicaragua that sealed the fate of Nicaraguas canal dreams.

LuwianMemories
LuwianMemories

@CamiloErazo 

Are you Panamanian? Are Panamanians really peeved that they might not be the only country in the Americas with a cross-continent waterway?

ManuelPrado
ManuelPrado

Poor poor grammar... Master the language then make remarks,. peasent

LuwianMemories
LuwianMemories

@BobSheepleherder 

China already has too much mindless construction (didn't you hear about the "ghost cities" over there?). From now on, what is constructed in China will have to be well thought out.

StephenSwain
StephenSwain

@Aly DeSantis Aly, that's "insight" (as in, to be able to see inside to learn what something means, or how it behaves).

formerlyjames
formerlyjames

@essejohn1 

Except that this appears to be a private venture with no Chinese government involvement.  I am sure that you can get in on the ground floor by sending your retirement funds to invest in the project.

ChristopherDaly
ChristopherDaly

@essejohn1 Good point... and the Chinese are mining like crazy in Afghanistan for their precious ores while we fight.  It is interesting too, you never hear of Chinese workers being assaulted around the world.  I wonder why that is?

MIsaiasDasNeves
MIsaiasDasNeves

@SkipperSam If they follow their normal MO, the Chinese will import 70%-80% of their labor which in many cases is made-up of low-level criminals that serve out their sentences onsite at the construction sites for no or very little remuneration. China needs "lebensraum" -- what better way than to setup these enclaves worldwide... Latin America, Africa, etc.

StephenSwain
StephenSwain

@RegCliff The French Bourse, (stock market) went totally bust on their attempt at the Panama canal.  They were so wiped out that they just left all their equipment there to rust, and went home.  More than 50,000 people died constructing the Panama canal.  You think even the Chinese could tolerate that kind of loss today?  We shall see how they actually do.

Elihude
Elihude

@lelandwi11iams Ah, come now. The economic sliding didn't start with Obi, now did it? If you want to help your country then go study science or engineering and work cheaply. Now a days, everybody wants to study medicine, law, business and nursing.

Elihude
Elihude

@1Tekumut @TIME @TIMEWorld What the hell is wrong with you, man? What does Turkey has got to do with Nicaragua canal? Keep your Turkish politics where it belongs!

cjh2nd
cjh2nd

@StephenSwain 

i thought she just meant she got trapped in the internet.  guess i was wrong...

MargaritaHinksoni
MargaritaHinksoni

@ChristopherDaly@essejohn1actually if you read the local newspapers for reports about Chinese workers in their countries you will find that Chinese workers have a global reputation for undermining local workers, accepting filthy living conditions and a whole lot more. Very recently in Ghana Chinese workers were assaulted... for those very reasons. China is in the happy position that other countries do not look to it as a land of freedom, and there is no expectation that China will defend those who seek redress, hence the reason why they are not embroiled in thankless fighting all over the globe. It's a win-win situation for them and a lose-lose situation for the US. For now.

LuwianMemories
LuwianMemories

@MIsaiasDasNeves @SkipperSam 

The whole China uses convict labor overseas claim has been pretty much discredited in academic circles among scholars who actually perform close research in this subject. Just read Deborah Brautigam's "The Dragon's Gift" for one example.

ChristopherDaly
ChristopherDaly

@Elihude @lelandwi11iams If I went back to school I would totally study engineering... there is an American manufacturing renaissance coming with high technology materials, super advanced information systems and medical products and drugs derived from the genome project.  The next 100 years we will either obliterate ourselves or rise to heights people cannot even imagine.  I like to believe we are going to succeed at solving regional wars by eliminating the needs for fossil fuels, that we will solve hunger and water problems through technology (water vaporators) and engineered crops.  We have been through the dark ages, we are not going back.

cjh2nd
cjh2nd

 @ManuelPrado

"Proper" is AN adjective.  If you're going to spout off at the "peasants" (which you misspelled) for grammatical errors, you might want to be sure your spelling and grammar are correct, or else you risk coming off sounding like a d0uche bag

ManuelPrado
ManuelPrado

Actually it's "proper grammar" good is a verb and is never used to describe a noun. "Proper" is adjective ,. "Word used to describe a noun"

No more free grammar lessons for you,.. Come to Nicaragua and ill educate you properly :)

LuwianMemories
LuwianMemories

@MargaritaHinksoni @ChristopherDaly @essejohn1 

You got it backwards - the Chinese prefer to keep to themselves and hence avoid entanglements, not because other countries don't look up to it. As a matter of fact, why do you think there is talk of the "Beijing Consensus" if other countries did not look up to China?