Nicaragua Canal – Part 1

About a year and a half ago, I went to Nicaragua to see what was happening with the construction of the Nicaragua Canal. I could not believe that there was a plan to build another canal through Central America, but I liked the concept, because it was touted as a way to bring prosperity to a clearly improvised Nicaragua. However, after a meeting with the canal administrator, I learned that there was indeed a plan to do just that.  Now some folks in the know say that it will never actually be built. Could they be right?  I don’t really know, but I am left wondering why I don’t see tons of dirt being excavated along the proposed route.

The announced kick-off date was in December of 2014, yet there is little in the form of a canal apparent today. Due to several factors, the canal is essentially on hold right now. However, in some circles, an unwavering resolve to push forward seems to exist, but before I get to the current state of affairs, I need to give you a brief thumbnail history lesson.

At the turn of the century, Nicaragua was being considered by the USA as a route for an inter-ocean canal. The French started in Panama, but they failed.  A fast talking Frenchman named Philippe Bunaua-Varilla was chosen to persuade the US to continue the work of the French in Panama, so that the French Company could recoup some of the investment money they had already lost on their ill-fated attempt to build the canal. Obviously, Bunaua-Varilla did his job well.

The story goes much deeper, but I will save that for another time. What is important here is that Bunaua-Varilla, managed to get the US Congress to vote against the Nicaragua route, in favor of the Panama route.

Fast forward about 100 years, and it appears that the “canal wars” are underway once again. However, this time it is quite different. The Panama Canal is about to open the new expanded locks, and the wider waterways. Soon the deeper, wider canal with the longer, wider lock chambers will be in operation. The fate of the Nicaragua Canal is far less certain because four factors have lined up to challenge its construction.

Factor 1:

Currently there is a drought in Nicaragua, similar to the one in Panama. Drought as used here is a relative term.  Nevertheless, it must be considered, and climate change could create a longer term problem as well. I personally believe that the drought condition will be reversed in Nicaragua, just as it will be in Panama.  In 1998, I was actually living in the Panama Canal.  I believe that was the last protracted drought in the canal area.  I saw firsthand the effect on the ship transits. There was great concern back then, but one day the rain came with a vengeance, and in a short 24 hours, the canal was back up to full operational level. I will tell you I have never seen rain like that before. This is the tropics, so that could also happen in Nicaragua, but for the moment, the drought in Nicaragua is a real factor.

Factor 2:

The original agreement was for the Chinese billionaire, Wang Jing, to invest 50 billion dollars for the canal, and some companion projects related to the canal. It really was a fantastic dream for the Nicaraguan people. Then came the Chinese Stock Market Crash, and it was reported that, over night Wang Jing lost most of his fortune. Apparently, he is currently looking for companion investors in the canal project.  Given the hard economic times, that might be a hard sell.

Factor 3:

The Nicaraguan court system is now overflowing with lawsuits against the government and the canal company. The last number that I heard was over 20,000 lawsuits. Recently, the government enacted a new law to void many of the lawsuits, but even that cannot stop the avalanche of court filings, and what is worse, the people are not waiting for the wheels of justice, they are taking to the streets to protect their land, some of which has been in their families for generations. Knowing that, I can’t help but wonder if that is what is behind Nicaragua’s recent purchase of 50 Russian battle tanks. (CLICK HERE to read the story)  Would not the money for those tanks  be better spent on helping the many Nicaraguans currentgly living in poverty?

Factor 4:

Worldwide Shipping is currently at what might be the lowest level in decades. Not much freight and other good are being shipped.  Giant cargo ships are sitting empty, and are being advertised for sale for a single US Dollar. The lower demand for worldwide shipping also means less demand for canal transits. The Panama Canal will have no problem at all providing transit accommodations for the existing demand, as well as an increased demand in the future.

Will the Nicaragua Canal ever be built? Some say yes, but a growing number of people say no. If there is no clear benefit to the people of Nicaragua, and if viable solutions to the aforementioned factors are not found, it is highly unlikely that a canal will ever be built in Nicaragua.

–Jim

 

2 thoughts on “Nicaragua Canal – Part 1

  1. Very interesting Jim. The drought will pass, the Chinese stock market will recover, the economy will rebound, but the feeling of the people who land in the canal will not likely change soon, unless there is a lot of money put on the table and alternative land grants provided for displaced people. The voice of the people is getting increasingly loud around the world.

  2. GPM: It is indeed apparent that people in many countries are frustrated, angry and scared. In Nicaragua the people on the canal route are being offered money to sell their land to the canal commission, but what is being offered is considered by many to be below the fair market value. If they do agree to sell, then it seems that at least some of them are using an “official” intermediary who in turn sells it to the Canal Authority for more than was paid to the owners. This practice is clearly not correct, and if it is true, it is adding insult to injury. Last year, I met with the President of the Nicaragua Canal, Manual Coronel Kautz. He is the highest authority connected with the canal. He assured me that the people are being fairly compensated. I plan to return to Nicaragua very soon to see first hand what is happening, and to meet again with the people and the authorities to hear what both sides have to say. As updates are forthcoming, I will share what I learn .

    As for the other impediments to the canal construction, they are very real. Like you, I feel that the rains will eventually come. However, the Chinese Stock Market Crash did alter the situation with regard to the money available for investment in the canal. Chinese politics is outside my circle of knowledge, so that situation might be something other than what it appears.

    The one issue that did not exist when the canal was being contemplated, is the dramatic slowdown in worldwide shipping. That must now be factored into the equation. Currently, and in the foreseeable future, there is no need for an additional canal.

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