Lawmakers in Nicaragua Vote To Build Their Own Canal
Wednesday, July 04 2012 @ 02:03 PM EDT
Contributed by: Don Winner
The initiative, approved by 85 of 91 lawmakers, establishes a legal system for the proposed 200 kilometer (124 mile) long canal that would link the Atlantic and Pacific oceans. Plans to build a canal across Nicaragua date back centuries, but were overtaken by the construction of the Panama Canal which opened in 1914. In recent years successive Nicaraguan governments have revived the concept as a way to promote development in the second poorest country in the Americas.
Feasibility studies are expected to cost $350 million dollars, while the actual construction of the new canal could hit $30 billion dollars. The government is proposing to raise the funds through a public/private partnership, with the state maintaining a 51% stake.
Project leader Eden Pastora said Nicaragua's canal, to be built along one of six proposed routes, would be larger and deeper than the Panama Canal. That vital waterway is currently undergoing a major $5.25 billion project to expand capacity. The upgrade, set to be completed in 2014, will allow some of the world's largest ships to pass through. The Panama Canal generated a record $1 billion for the government during fiscal year 2010-2011 and a total of $6.6 billion since the United States handed over control more than a decade ago.
Editor's Comment: First of all, Nicaragua is broke. They don't have either the money or the capacity to borrow money to build this $30 billion dollar project. Secondly, they want to keep a 51% stake. So what they are saying to potential investors is - come here, spend $30 billion dollars to build us a new canal in Nicaragua, and for your money you will get 49% of what you spent. This project is more than just a little risky for any potential investor. First of all, you're dealing with the government of Daniel Ortega and a bunch of left wing socialists. Secondly, the canal once finished would be more than twice as long as the Panama Canal, and any ships wanting to use it would have a choice - do we use the Panama Canal or the Nicaraguan canal. Panama would be in a very strong position to compete because by the time the proposed Nicaraguan canal opens (in ten years or more) the newly expanded Panama Canal would be open and operating. If there was a competing canal, Panama could simply drop their toll rates down to a point where every ship would first choose Panama, and then only use Nicaragua if there were no spots left in Panama. In short, the Panama Canal is already bought and paid for and there would be no need or pressure to have to charge enough money to pay for new construction - only to operate and maintain. Anyway, whatever. This plan is most likely nothing more than a Nicaraguan pipe dream. Smart guys with big calculators and a lot of money won't take the risk - because it's a loser on the math.
Copyright 2012 by Don Winner for Panama-Guide.com. Go ahead and use whatever you like as long as you credit the source. Salud.