In June, President Daniel Ortega of Nicaragua announced that the country had signed a deal with a Chinese development group to build a canal that would rival the newly-expanded Panama Canal. The proposed canal would have a wider berth and greater depth than the Panama and Suez Canals, making it the only viable route for the new generation of Super Post-Panamax freighters currently being built in Asia to cross Central America. This could potentially disrupt the incumbent advantage of the Panama Canal,which currently sees 5percent of global freight passing through its locks. The ambitious plan would cost an estimated $40 billion dollars, take five years to complete and stretch an incredible 82 miles across the country. The site selection process for each end and the economic impact the project will have is an undertaking in its own right. To sweeten the deal, HKND Group has promised to build international airports at both ends of the canal, as well as other infrastructure projects to support the canal’s operations. In return they were given the rights to develop and operate the canal for 50 years.
A new canal does not come without layers of complexity, and this is no exception. The development group that signed the deal with Nicaragua was given incredible leeway in their ability to make decisions on the project with regard to route, environmental impact or construction. This authority has already been called into question by President Daniel Ortega after an announcement of the selected route was leaked prior to completion of feasibility studies on the various options. As you might imagine, when the party that signed the deal raises concerns about the developer, the opposition is having a field day. Other concerns about the environmental impact of canal construction are running rampant in a pristine Central American rainforests that contains hundreds of protected species, numerous preserves. The proposed route of the canal , passes an active volcano in the center of Lake Nicaragua, which also supplies drinking water to 50% of the country’s population.
One thing is certain, there will be more to this conversation than a mere infrastructure construction project.