Nicaragua rushes to fulfill its canal dreams - with a hand from China

Nicaragua has dreamed of building a canal for hundreds of years. Now it is pursuing a plan to give a Chinese company exclusive rights to build the largest development project in Nicaraguan history.

With little information and no public debate, the Ortega administration is pushing forward on its plans to give an unknown Chinese company the exclusive rights to build the largest development project in Nicaragua’s history.

On June 5, President Daniel Ortega sent the National Assembly a proposed law that grants a 50-year concession – with an additional 50-year option – to a recently formed Chinese company to build and manage a megaproject combo that includes an inter-oceanic canal, an oil pipeline, a “dry canal” freight railroad, two deepwater ports, two airports, and a series of free-trade zones. The bill, marked “urgent,” has not been subject to any public scrutiny or debate, despite receiving the imprimatur of Nicaragua’s main business chambers.

The canal concession is expected to be passed into law on Thursday by the Sandinista supermajority, officially ratifying a memorandum of understanding signed last September between President Ortega and the Hong Kong-based Chinese company HK Nicaragua Canal Development Investment Co. Ltd. (HKND Group). The Chinese company reportedly controls a local subsidiary, “The Developer of Big Infrastructure Company, S.A.,” or EDGI by its Spanish acronym.

Other than that, no details about the canal project have been made public. Nicaraguans have no idea where the funding will come from, what the proposed canal route is, how long it would take to build, what the environmental toll would be, or even how much the project will cost. At various times over the past few years, the Ortega administration has said the canal would cost $18 billion, $26 billion, $30 billion, $35 billion, and most recently, $40 billion – all before the first shovel of dirt is thrown.

The only thing that’s known about the proposed canal route is that it will not be along the San Juan River, according to recent statements by Ortega. All that’s known about HKND is that their CEO is a Chinese telecom tycoon with no experience building canals or port infrastructure.

A 'Canal dream'

Talk of building an inter-oceanic canal across Nicaragua has been going on for 200 years, with varying degrees of seriousness. The canal has been a chimera that has been chased by presidents, foreign tycoons, and Nicaraguan national heroes alike.

The closest the country came to achieving its canal dreams was in the mid 19^th century, when US industrialist Cornelius Vanderbilt started to dredge the canal himself on Nicaragua’s Caribbean coast; today, the towering remains of Vanderbilt’s river dredge still protrude from the bottom of the San Juan lagoon as a rusted reminder of his failed attempt.

Ultimately, Nicaragua lost out on its canal bid to Panama, but that hasn’t stopped people from talking about it. In the past century, the Nicaraguan Canal has been the fantasy of everyone from left-wing revolutionary hero Gen. Augusto C. Sandino to rightwing former President Enrique Bolaños.

Prior to the Sandinistas’ return to power in 2007, Nicaragua was simultaneously entertaining plans for four separate canal projects – two wet canals and two “dry canals,” or inter-oceanic freight railroads.

Currently, the Sandinista administration is pursuing only one bundled megaproject.

Opposition: can we slow things down a bit?

After more than a century of being mesmerized by the ignis fatuus of canal fantasy, Nicaragua’s government is suddenly moving a little too fast for some people’s comfort. Opposition congressman Carlos Langrand thinks the Sandinistas are trying to hustle the megaproject forward quickly and secretly because they want to handle the Chinese canal with the same opacity with which they have managed Venezuelan AIBA aid over the past six years.

“The scale of this project affects all Nicaraguans, the future of Lake Nicaragua, our environmental resources and the economy, but the Sandinistas have made it clear that the last thing they want is to be questioned or consulted on this project, which is totally lacking in transparency,” says Mr. Langrand. “We have many more questions than answers about this project.”

Langrand, who sits on the legislative commission on infrastructure, which is conducting a perfunctory 48-hour consultation on the bill before passing it to the congressional floor for a vote this week, accuses the Sandinistas of “confiscating the dream of Nicaraguans” by handing the project over to the Chinese. (Officially, Nicaragua will remain the majority stakeholder with 51 percent ownership over the canal, but the terms of the arrangement with the Chinese company is mostly unclear.)

China and Nicaragua do not have diplomatic relations, which adds a level of complexity to the project, Langrand says. He insists the Chinese government must state its official position on the canal project before anything moves forward. Critics say it's unlikely that a private and untested Chinese company could do such a large project on its own, without the backing of the Chinese government.

Indeed, the involvement of HKND and its local subsidiary has raised many unanswered questions, including who they are and what their qualifications are like.

The Chinese company is run by telecom mogul and apparent canal enthusiast Wang Jing, whose cellphone company Xinwei recently won a full-service telecom operator license in a Nicaraguan bidding process. Xinwei is also linked to the company China Great Wall Industry, which is in the process of building a $244 million satellite for the Sandinista government.

Ortega: canal project will bring progress

The Nicaraguan government claims the canal project will be game-changer for the country. The administration promises the canal will create thousands of jobs, lift the country out of poverty, and secure Nicaragua’s “economic sovereignty” for years to come – even if that sovereignty is 49 percent controlled by foreign investors.

“After so many centuries of struggling to convert the canal into a reality, finally we are approaching the moment in history of well-being for the Nicaraguan people, of well-being for Nicaraguan families, and I am certain that Brazil will be interested in this project,” Ortega said Wednesday night, as he received the credentials from the ambassadors of Brazil, Canada, Switzerland, Canada, Kuwait, and Saudi Arabia, and then pitched the canal project to each one of them in return.

To newly arrived Saudi Ambassador Hussein Mohammad Amdbdulfatah Alassiri, Ortega said, “I want you to transmit to King Abdulá, dear ambassador, the affection and greetings of the Nicaraguan people for your people and your king, and tell him also about the news that we sent the bill to the National Assembly today that will allow us to build the Great Canal of Nicaragua. I am sure that Saudi Arabia will be interested in the canal project.”

Ortega repeated his message to the other five ambassadors, telling each how he had sent the bill to congress earlier that day and how he was certain their governments would be interested in Nicaragua’s canal plans.

“The project has been advancing, and once the law is approved we will have until May of next year to prepare the feasibility study. And once that is ready, we will start the project,” Ortega said.

The president didn’t mention the timeframe for any environmental-impact studies, or address recent concerns raised by his top environmental adviser, Dr. Jaime Incer, who has warned that a water canal across Lake Cocibolca is not feasible and would spell ecological disaster for Nicaragua.

Instead, Ortega talked about how Gen. Augusto Sandino “dreamed” of a canal across Nicaragua. “We are now convinced that the moment has come for this dream to become a reality,” the president said.

– A version of this article first appeared on the author's website, Nicaragua Dispatch.