Nicaragua fast-tracks huge project

MANAGUA, Nicaragua — Nicaragua is trying to revive a centuries-old dream of building an inter-ocean canal, a project experts say could take 11 years to build, cost $40 billion and require digging about 130 miles of waterway.

The government is trying to rush approval of a canal linking the Pacific to the Atlantic through the country’s congress in less than two weeks in a nation that doesn’t even yet have a paved road connecting the two oceans. And some congressmen are asking why there’s such a rush, calling for a cool head and a careful consideration of costs and benefits, both environmental and economic.

Nicaraguan President Daniel Ortega presented the project just Tuesday and hopes to submit it to at least an initial vote on Monday, and gain final approval by next Friday.

Just as the Panama Canal was a projection of growing U.S. power at the start of the 20th century, the Nicaragua project is an expression of China’s growing influence and financial clout around the world. Some are concerned, however, that while China’s record in big infrastructure projects is solid, its track record on environmental sensitivity is unenviable.

The demand will probably be there by the time the project is finished, said Jason Bittner, director of the Center for Urban Transportation Research at the University of Southern Florida. The question is whether the route can compete with its two big competitors, the century-old Panama Canal and the “land bridge” of railway networks that connect U.S. West Coast ports with the East Coast.

“I don’t anticipate there being any reduced demand in trade between the global trading partners, so East Asia and the eastern United States will continue to have significant trade,” said Bittner. “If you make this large public sector investment, it will be used, as long as it’s priced properly, as long as the Panama Canal isn’t significantly undercutting it.”

Nicaragua, like Panama, which is currently expanding its own canal to handle wider ships, has lots of water. But much of Nicaragua’s water is earmarked for human use, and its lush rivers are too environmentally sensitive to be simply dredged into waterways or dammed to provide water to operate locks. Panama faced few such restrictions in the early 1900s when its canal was built.

In a previous presentation of the project presented in 2006, the promoters acknowledged there would probably have to be some dam-building, perhaps on rivers as diplomatically and environmentally sensitive as the San Juan river, which runs along the border with neighboring Costa Rica.

With 1.7 billion gallons (6.6 million cubic meters) of water per day needed to run Nicaragua’s proposed locks, and tens of millions of tons of excavation needed — the canal will be 200 feet (60 meters) deep in places — the project looks daunting.

But Bittner noted that these projects usually do.

“Certainly in scope, in technology even the just effort of doing so, it is really not that much different from cutting the original Panama Canal,” he said.

“I mean these things that we have done, the entire interstate highway system, these are massive projects that, if you were trying to put a lens to them, and say `we can’t get this because they’re so massive,’ we probably wouldn’t have done them, but nonetheless, there they sit.”

There are key differences: Nicaragua’s canal would have to be more than three times longer than Panama’s, which cuts through Central America’s narrowest point.

Eduardo Lugo, a Panamanian expert who worked for 10 years on traffic-demand calculations for Panama’s own expansion effort and now works as a private consultant, said the length would tend to make the project less competitive. “It’s very long, both to dredge it and maintain it. That is going to require high maintenance costs.”

The Nicaraguan canal’s promoters argued in the 2006 presentation, whose calculations would now probably have to be set back seven years, that they could capture 4.5 percent of world maritime freight traffic and earn 22-percent profits by 2025, though their cost estimates at the time were much lower than the project presented this week.

Promoters say the Nicaraguan canal has a key advantage: it’s not all artificial. The huge Lake Nicaragua sits separated from the Pacific by a thin strip of land; once inside, big oceangoing freighters could travel about 50 miles (80 kilometers) on the lake’s waters before going through a pair of locks, and into a waterway dug across the waist of the country to the low, swampy Atlantic coast.

Still, Lugo notes, “this is a huge project that has a lot of engineering and construction challenges. It would have very high costs and these projects are basically carried out based on returns on investment.”

“But $40 billion is an extremely high amount and based on my experience and the studies we have done on world trade flows, the amount of traffic that would be needed to pay for a project of this size doesn’t exist.”

Panama, which already has a steady income flow from its canal, thought long and hard before embarking on a 7-year, $5.2 billion expansion project, scheduled to be finished next year, to allow larger ships to use its waterway.

Nicaragua, however, is rushing in. Proponents say freight traffic demand will outstrip the capacity of even the expanded Panama canal by more than 300 percent by 2025. They say the waterway could create 40,000 construction jobs and essentially double the per-capita GDP of Nicaragua, one of the poorest countries in Latin America. The government plans to grant the Chinese company a concession for 100 years.

Hong Kong-registered company, HK Nicaragua Canal Development Investment Co. Ltd., has an office in the Nicaraguan capital. But the company has not responded to repeated attempts to contact the firm’s officials; including leaving messages with the receptionist and security staff at the office. While it is registered in Honk Kong, the sole director listed on incorporation papers gave an address in Beijing. That director, Wang Jing, is listed as being a director of 12 other existing or dissolved Hong Kong companies.

Nicaraguan congressional leader Rene Nunez, an Ortega supporter, said “this is a question of a project that is very important for the country, and that is why it is being given urgent priority.”

“I think it is urgently necessary to solve problems like unemployment and making Nicaragua more attractive to investors, and that’s why we should approve this speedily,” said Erwin Castro, a congressman from Ortega’s Sandinista Front.

“I do not understand what the rush is,” said opposition congressman Luis Callejas, who said lawmakers have been asked to discuss the bill Friday. “It’s such a sensitive topic that the population should be consulted.”