Nicaragua approves Panama Canal alternative

Monday, June 24 2013 @ 09:38 am EDT

Contributed by: Don Winner

By 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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