Winners and losers in Nicaragua’s ‘Grand Canal’ project

By David Hutt | Special to The Tico Times

LEÓN, Nicaragua – Plans for building a waterway across Nicaragua have existed since Spaniards first stepped foot on Central America. Since then, many promises for investment in an interoceanic canal have been made, but all failed to materialize.

Last month saw the Nicaraguan government sign a memorandum of understanding with the newly-created HK Nicaragua Canal Development Investment Co. Ltd, which will be financed by Chinese telecom giant Xinwei, for the construction of a wet and dry canal.

The wet canal – in theory – would consist of an interoceanic waterway to connect the Caribbean and Pacific coasts of Nicaragua. The expected route would use the San Juan River on Nicaragua’s southern border with Costa Rica to travel from the Atlantic to the east to Lake Managua near the western coast. A canal would be built to navigate across the Rivas isthmus.

The dry canal is a euphemism for a railroad that would connect Monkey Point, south of Bluefields (the capital of Nicaragua’s South Atlantic Autonomous Region), with the Port of Corinto, on the northwestern Pacific coast.

The cost of the entire project has been estimated at $30 billion and is likely to take well over a decade to complete. However, these are only preliminary estimates, and more informed data is expected in early 2013 when the engineering consortium Royal HaskoningDHV and Ecorys completes a feasibility study.

According to Nicaraguan President Daniel Ortega, revenue from the canal “will lift the country out of poverty.”  Thousands of jobs would be created while revenue from the canal could multiply Nicaragua’s gross domestic product, Ortega claimed.

Last year, the Panama Canal brought in more than $1 billion for that country, and Ortega and Sandinista leaders expect a future Nicaragua canal to generate similar revenue. Officials said that as part of the deal, the Nicaraguan government would retain 51 percent of canal shares.

One of the most optimistic individuals in Nicaragua is the man in charge of the canal, Edén Pastora, who under the nom de guerre Comandante Cero led a 1978 attack on the Nicaraguan National Palace and helped overthrow dictator Anastasio Somoza.

“There is a selfish attitude in those who oppose the canal project, because they only think of political competition. When the canal becomes a reality, the government will undoubtedly gain prestige. But the biggest gains will be made by the people,” Pastora said in a recent interview with the Nicaraguan daily La Prensa.

Comandante Cero was an ally of the Sandinistas during the years of revolution, but became disillusioned with the party and became a Contra fighter during the civil war. He then grew disillusioned with Nicaragua itself and left to take citizenship in Costa Rica during the 1990s.

He later returned to Nicaragua yet again and patched up his differences with Ortega and Sandinista leadership in 2010. In the meantime, he also managed to start a diplomatic spat with Costa Rica over territory rights for an island at the entrance to the Río San Juan.

Land disputes and lucrative plans

In 2010, Pastora was put in charge of a commission responsible for reviving the canal project. He was named minister of development of the Río San Juan Basin and was tasked with the job of dredging the border river.

For his efforts, Pastora received a monthly government salary of $80,000; he joked that this was not enough: “It is nothing. I’m asking for $200,000 a month,” he said in an interview earlier this year with McClatchy Newspapers.

In February, Pastora had even more reason to be happy when the government gifted him 34.5 acres of land near the city of Rivas. According to Swiss-born Walter Bühler, who claims he owns the land in question, armed police officers and state officials arrived on Feb. 13 to confiscate his property.

Bühler said that officials informed him that land rights are decades old and belong to the government. Pastora was given a piece of adjacent land two years before.

The extensive property is located near the area where a potential canal would likely pass as it exits Lake Nicaragua, from Las Lejas to Brito on the Pacific coast. 

Still, Pastora’s dreams stretch beyond the canal, as he is busy developing and promoting the Río San Juan area as a new playground for the wealthy. “The gentlemen millionaires will come on their executive jets, get on their yachts and go all over the Caribbean,” Pastora said. “All kinds and sizes of yachts will come, and they will pay.”

Chinese investors also have much to celebrate. Orlando Castillo, president of Nicaragua’s telecommunications regulatory agency, announced that Xinwei will be allowed to compete against the nation’s two mobile phone providers. The Chinese company also will be able to invest as much as $300 million in the telecom sector in its first two years of competition, and $800 million for mobile phone and Internet rights.

However, history has shown that optimism and contracts sometimes mean very little in Nicaragua. Perhaps the biggest problem for the project could be its irrelevance. The last major push for the canal came almost seven years ago, when the Panama Canal was reaching its size limitations. Ships were becoming larger and heavier, and the century-old canal was struggling to manage them. 

But in 2006, the Panamanian government held a referendum supported by 76.8 percent of citizens for the expansion of the canal. Expected to finish in 2015, the expanded third set of locks will see the canal double in size and allow it to modernize its capabilities to meet the demands of Post-Panamax ships.

Other problems that may arise with Nicaragua’s canal project are the issue of land rights and environmental concerns. The dry canal railroad would have to cross much of rural Nicaragua and would be constructed within the vicinity of protected rain forests and national parks.

A particular concern is the proposed construction of a new deep-water port at Monkey Point. “It would effectively destroy the Rama Indian and Creole ethnic community that has lived there for centuries”, a study by Nicanet, an international solidarity organization, noted.