There’s not much to like in Nicaragua's plan to build a $50bn canal. Fortunately the project seems to be sinking
The world’s largest earth-moving project gets surprisingly little attention. Type “Nicaragua Canal” in Google and all you get is a list of sparse entries, most of which are two months old or more. One publication has been following progress at the $50 billion project more assiduously than most, however. The Havana Times, a Cuban blog edited in Nicaragua, is like a real-time barometer of how locals are feeling towards the gigantic scheme.
As it turns out conditions on the ground look rather stormy. Last Friday, farmers due to be relocated during building works held their 60th protest against the expropriation of their land, which they say is going to be bought well below market prices. The day before a nation-wide poll showed that 34 percent of Nicaraguans regard the canal as “pure propaganda” and 25 percent reckon more studies are needed.
This is bad news for Daniel Ortega, Nicaragua's president, who's made the prospective waterway his pet project. Although ‘monster’ would probably describe it better: the canal, projected to stretch over 260 kilometres, would require the muscles of 50,000 labourers and 2,000 machines to excavate about 5 billion cubic metres of dirt. It would use 5 billion litres of fuel and require the relocation of 30,000 people.
The president and his supporters say the project will boost the economy and improve living standards in Latin America’s second-poorest country. HKND, the Chinese company in charge of developing the project, promises to turn the canal's banks into new arable land three times the size of Manhattan. Uprooted forests will be replanted and “better cared for” than they were before, according to project leader Bill Wild.
Even if all of this stacked up, it would be optimistic to believe that no corners will be cut during such a pharaonic enterprise. But the project's feasibility studies, approved in November, are highly dubious in the first place. Non-official observers like Nicaragua’s Academy of Sciences say the study is “superficial, generic and incomplete” – a bit of a joke, in short.
The government's reassurances, which come 10 months before a general election, indeed look a bit shaky. A 107-kilometre, 280-metre-wide conduit is to be dug through the untouched Lake Nicaragua; excavation works will take place in areas populated by rare species. Expropriation will affect indigenous people occupying sacred lands. It’s hard to imagine how the sum of all this will fail to cause sizable environmental damage and social disruption.
The project’s economic case would have to be water-tight to compensate for what seems little short of a multi-pronged disaster. It isn’t.
The proposed two-lock waterway is expected to take vessels with a capacity of 25,000 20-foot containers, or 20-foot equivalent units (TEUs). The world’s biggest ships today have a capacity of around 19,000 TEUs, and represent a fraction of the market. The widened Panama Canal, due to open this year, won't allow them to pass (its capacity will be limited to 13,000 TEUs). The idea is that a new, bigger canal will save mega-ships a lot of time (by allowing them to avoid going around Cape Horn or via Suez).
But how many such vessels will see the light of day remains to be seen. Rating agencies reckon the shipping industry is on the verge of capsizing. Partly this is due to overcapacity at a time of slowing global trade. But structural reasons exist too: consumer goods are increasingly being produced closer to home. The competitive advantage of the Nicaragua Canal can't be taken for granted either. For it to earn a decent return on investment, critics say, it would have to levy twice the tolls charged by its Panama rival. Customers may see little point in paying so much.
So why would HKND get involved with this mess? Some suggest China would be happy to help the company get financing for the project, so as to use the canal both for commercial and military vessels. That would help extend its reach in the Atlantic - America's backyard - at a time when America is boosting its presence in the Pacific. HKND denies this, of course. It says the money will come from private investors and development banks. But few seem to have rushed to the opportunity – or those who have are keeping remarkably silent.
And so have the Americans, mostly. That may reflect their suspicion that the canal will never be built. Recent developments lend credit to their hopes: the start of major works got delayed by a year before Christmas after plunging Chinese stocks caused Wang Jing, the tycoon behind HKND, to lose 85 percent of his wealth. His fortune has since partly recovered - but there's still plenty of scope for the mega-project to tank spectacularly.