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Nicaragua Grand Canal a Road to Ruin

By: PanAm Post Staff - Jan 26, 2015, 9:48 am

EspañolThe Nicaraguan government has hailed the construction of its own Grand Canal as set to bring prosperity and economic progress never seen before in the Central American country. President Daniel Ortega has promised that the project, worth an estimated US$50 billion, will bring a “new era” for the country and the continent. However, despite the fact that work on the project has already begun, uncertainty continues to mount.

The project has been debated for centuries, but was mothballed, seemingly forever, by the US decision at the beginning of the 20th century to opt for Panama as the site of its interoceanic conduit. An obscure Chinese businessman, Wang Jing, director of the HKND Group, will now make the dream a reality. Chinese money has revived Nicaragua’s desire for greatness, but despite the promises of economic growth and employment, the very viability of the canal still remains open to doubt.

Wang Jing — a well-known and controversial business associate of Ortega — has been presented as the ideal private backer to head up efforts to finance and construct the canal, despite having no previous experience in huge infrastructure projects. Suspicions that Beijing is pulling the strings behind the HKND manager are understandable. Worries are also merited by ongoing questions about the project’s viability: its worth is some five times greater than the Nicaraguan economy, and its construction takes place in a country with a long tradition of political instability.

The Peruvian daily El Comercio and Julian Snelder of the National Interest, among others, have claimed that behind the figure of Wang, the Chinese government is really financing the project. In geopolitical terms, the presence of a second short-cut between the Atlantic and Pacific oceans will secure China a key commercial artery without having to depend on third parties as in Panama.

Nevertheless, sources from the Chinese government maintain that Wang has no connections with the country’s political elite – at least none that would be willing or able to cover the the $50 billion tab for his latest project.

In contrast with its neighbor Costa Rica, which broke off relations with Taiwan in 2007, Nicaragua maintains a flexible relationship with Taipei that has proved unpopular among the Chinese Communist Party. As a result, the idea of Nicaragua constituting a “spear-head” for Chinese presence in the region has weakened, while the thesis outlined by Nicaraguan weekly El Confidencial gathers strength: that the Grand Canal is little more than a “scam” of epic proportions.

Alongside lingering question marks over the financial viability of the canal, and queries over the exact nature of Chinese involvement, preparatory works on the ground have produced fresh controversy. Cries of “homeland for sale” have rallied local farmers belonging to rural populations along the shore of Lake Nicaragua, set to form part of the new waterway, as they accuse the charismatic and populist Ortega, a former guerrilla, of having betrayed them.

The presence of the Nicaraguan army has provoked resistance among local residents, several of whom have complained of human-rights abuses and violations of their property rights. The terms of the concession made to HKND — set to operate the canal for 50 years, with a chance to renew its license for another 50 — establish that the Hong Kong-based group will pay a significantly lower price for the affected land than market value. Irregularities in title deeds — in some cases, completely non-existent — have further complicated the process of compensating locals in the course of expropriations.

Technological shortcomings, fears over the environmental impact of a work of this size, and uncertainty over whether Nicaragua will be able to provide the skilled labor force necessary for construction work — or whether it will be imported from China — are only some of the additional challenges that the ambitious initiative has yet to confront.

One fundamental point, often left aside in the numerous analyses that the canal has generated, is that the idea of such an infrastructure project providing a gateway for Nicaragua to a better future is impossible. Both economic theory and hard-learned historical lessons demonstrate that prosperity doesn’t depend on megalomaniac projects. Venezuela, for example, for all its millions of petrodollars, is suffering from worsening economic freefall.

The hubristic project will leave a bitter precedent in the trampling of the property rights of thousands of Nicaraguans. Everything suggests that the Nicaraguan Canal will be nothing more than monument to the collectivist thinking that has already inflicted so much damage upon the continent.

Translated by Laurie Blair.