Nicaragua approves concession for Chinese company to build, operate inter-oceanic canal

June 13, 2013

As protesters demonstrated outside, Nicaragua’s National Assembly approved a bill granting a Chinese company a 50-year concession to build and operate a massive inter-oceanic canal and railroad system that could rival the Panama Canal, the Nicaraguan daily La Prensa reported on Thursday. Three times longer than the Panama Canal, the $40 billion “Great Canal of Nicaragua” could dramatically reshape the region’s lack-luster economy, the government says. But critics and environmentalists remain wary, according to The Guardian.

President Daniel Ortega has billed the development as a deus ex machina for the country’s economic woes, promising that the construction of the 130-mile waterway will create tens of thousands of jobs and lift the country out of poverty, according to the GlobalPost. Nicaragua is the second-poorest country in Latin America and the Caribbean after Haiti, according to the World Bank.

With a super majority in the legislature, Ortega’s Sandinista Front easily passed the controversial development 61 to 25, according to several sources, but that did not stop opposition members and protesters from voicing their concerns.

Critics blasted the government for its lack of transparency regarding the project. Despite Ortega’s claim that the megaproject will provide Nicaragua with “economic sovereignty,” many are concerned about the Hong Kong-based HK Nicaragua Canal Development Investment Co. Ltd.’s 49 percent ownership share in the project. The government retains a controlling 51 percent of the project.

The bill passed Thursday requires the company to pay $10 million annually for a decade to Nicaragua, and the government will get 1 percent of the canal’s revenues, a figure that will gradually increase, according to Americas Society/Council of the Americas. Protesters outside the legislature called Ortega and other supporters of the projects “sellouts” for handing over the expansive concession to the Chinese, according to La Prensa.

News that the company would spearhead the development raised eyebrows considering that its only previous experience is in telecommunications, reported Fox News.

While the exact route of the canal has not been announced, Nicaragua Dispatch reported on June 6 that it would not traverse the San Juan River, which serves as part of the border between Nicaragua and Costa Rica, according to statements by the president. Many sources noted that the canal will almost certainly cross Lake Nicaragua, something environmentalists warn will threaten the country’s largest source of fresh water and an important wildlife habitat.

While the environment remains a concern, the economics of the project may be its greatest hurdle. Falling demand for massive container shipping and even potential Artic routes opened by global warming may challenge the megaproject’s financial viability, reported Fox News.

The Rama and Kirol indigenous communities also complained that they had not been sufficiently informed about the project and its impact on their land.

Now that the legislature has approved the project, the government has until May 2014 to conduct a feasibility and environmental impact study, the same year Panama estimates the expansion of its famous waterway will be complete.

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