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Monday, September 01 2014 @ 03:33 AM EDT

Nicaragua approves Panama Canal alternative

Canal Daily OperationBy Clarise Ardúz & Chris Sleight - The Nicaraguan Congress has approved a law to allow a Chinese company to construct and operate a trans-oceanic canal. The agreement could see Hong Kong Nicaragua Canal Development Investment Co. (HKND Group) construct the US$ 40 billion canal over a ten-year period and then operate it for up to a century.

The law was passed by 61 votes to 25, with one abstention in the face of public protests. The project has not been subject to a public tender and has been criticised as a loss of Nicaraguan sovereignty. Its signing followed a July 2012 ruling by Congress to create the legal regime and government entity to develop the canal. It was followed in September by a Memorandum of understanding with HKND Group, followed in October with a Deed of Cooperation with the company.

The route of the canal has not been finalised, but it would be likely to make use of Lake Nicaragua in the west of the country near the Pacific coast. However, in order to reach this from the Atlantic side, at least a 100 km route would have to be excavated.

Speaking at the signing of the new law, Wang Jing, chairman of privately-held HKND Group said, “The one hundred year old dream of the Nicaraguan people for a Nicaragua grand canal emerges in response to this demand. With the full support from the Government of Nicaragua and the great assistance from friends from all industries and all regions, we are committed to ensure the proper design, construction and operation of the Nicaragua Canal.”

The company said that by 2030, the value of goods being transported through the Nicaraguan and Panama canals could be US$ 1.4 trillion per year.

Alternative schemes

In other news, the Honduran government has signed a memorandum of understanding with China Harbour Engineering Company (CHEC) to build Pacific and Atlantic ports, linked by railway lines as a further inter-oceanic trade link. Sites at Amapala on the Pacific side and Castilla on the Atlantic have been identified, and they would be linked by up to 10 rail lines and an oil pipeline. The cost of the scheme is put at US$ 20 billion.

Guatemala has been looking into a similar scheme for some time, which would see two ports linked by a new 390 km high-speed rail line, with gas and oil pipelines running alongside it. (khl.com)

Editor's Comment: It doesn't cost the Nicaraguan congress anything to pass a law. However it will cost this group more than $40 billion dollars to build this new canal. I stand by my assessment that this proposal will probably never be built, simply because the math and numbers don't work very well. The demand simply isn't there. They won't have a monopoly. Remember how Maersk recently rerouted some of their traffic through the Suez canal because it was cheaper than going through the Panama Canal? Shippers don't give a rat's ass about Nicaragua's dreams, or China's desire to expand their influence. They care about the bottom line, making money, and keeping their shipping costs as low as possible. Now, if this Chinese outfit has $40 billion dollars to blow - then more power to them. But it's going to be a very, very long time before this new Nicaraguan canal - if it's ever built at all - is able to pay off the cost of construction and turn a profit. I see this as hype and boondoggle. And consider the source. Daniel Ortega. Just let that one sink in for a minute. Maybe the Chinese want a way to get their warships into the Atlantic? Strategically thinking, maybe they have decided that eventually the US and China might be at war at some point in the future? If that's the case, then they will build it, and profit motive doesn't matter.

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Nicaragua approves Panama Canal alternative | 3 comments | Create New Account
The following comments are owned by whomever posted them. This site is not responsible for what they say.
Nicaragua approves Panama Canal alternative
Authored by: cayrick on Monday, June 24 2013 @ 10:25 AM EDT

The Chinese are shrewd investors who do not look at the next quarter. They are forward thinking investors with a time horizon measured in decades. They are motivated to convert their sizable reserves of US dollars into hard assets before the dollar collapses. The canal provides work for Chinese citizens for a decade. It will provide jobs for Nicaraguans as well and will contribute to the Nicaraguan GDP; help, that it certainly needs. Chinese will also be investing in industrial parks,and terminals and other infrastructure to support the canal.
From a political perspective it expands the Chinese sphere of influence in Central America. The Chinese are not totally benevolent in assistance to other countries. The Chinese will extract the lion's share of revenue for a century but this is revenue that Nicargua would otherwise not have. The economic behemoth that this canal will create will give the Chinese significant political clout in Nicaraguan politics. This differs from the American Model of territorial expansion where destabilization and invasion are the tools of the trade. I refer you to John Perkins book "Confessions of an Economic Hitman".
Once the canal is constructed the Chinese can play one canal off against the other for advantageous pricing. Chinese shipping lines will use the Nicaraguan Canal as it results in more benefits to China. There are tremendous benefits, short and long term for both Nicaragua and China for this project not to happen.
The article does not discuss the existence of vessels larger than Panamax ships. If the Nicaraguan canal is designed for these vessels then it will be one generation ahead of the Panama Canal.
Of course there are military advantages for the Chinese in moving assets from the Pacific to the Atlantic, but this is probably not a significant factor in the decision. This seems to be a win win for both China and Nicaragua.

Nicaragua approves Panama Canal alternative
Authored by: Wayne on Monday, June 24 2013 @ 06:54 PM EDT

The company planning on building this canal only has 68 million in capitol so they will need to raise the rest of the money from investors to which I say good luck........