A Man, a Plan, a Really Bad Canal: Nicaragua

Lake Nicaragua, Viewed from Northern Costa Rica, 2013

Lake Nicaragua, Viewed from Northern Costa Rica, 2013

HKND, the Hong Kong-based company that was granted a concession to build a canal across Central America in southern Nicaragua, broke ground December 22 on the first stage of the canal, a new port city on the Pacific side. The US$50 billion project would construct a 238 kilometer-long canal, 83 meters wide and 28 meters deep, from the Pacific Coast through Lake Nicaragua, and then through two biological reserves on the Caribbean side of the country. It’s an ecological disaster, criticized by every outside observer who has studied it.

The Man, in this case, is Wang Jing, a Chinese billionaire who leads and wholly owns HKND Group.  In January 2014 Wang Jing and Nicaraguan President Daniel Ortega1 issued a statement that construction of the project would begin in December 2014, and that it will be completed in 2019.

The Plan is a canal three times as long as the Panama Canal. The Plan involves a concession that doesn’t confer many benefits on the Nicaraguan people – after Haiti, the poorest country in the Western Hemisphere – and doesn’t even assure that a canal will be built. It does assure, however, that land concessions will be made available, tax-free, and far below market prices, to Wang Jing and his company.

Nicaraguan opponents of the proposed canal point out there are no benefits to Nicaragua; HKND would keep all of the revenues once the canal is in operation for 50 years. HKND is not obligated to pay market prices for the land, is not required to use Nicaraguan construction companies or hire Nicaraguan workers and is not obligated by Nicaraguan laws. HKND itself does not have any civil engineering expertise and has been acussed of being a front for the Chinese government, which it denies. HKND seems not to have secured the capital needed for the project and is now asking for the land to be given to them on a 50 year credit or lease.

But the route has been selected.

Proposed Route of Nicaraguan Canal

Proposed Route of Nicaraguan Canal

That’s four sets of locks, port cities at either end and an international airport, if you are counting.

The ecological consequences are potentially devastating. Lake Nicaragua is the largest freshwater lake in Central America, but it is quite shallow. The canal channel will have to be dug. The lake itself is home to a number of endangered species. The potential for invasive species, disturbance by dredging and ballast discharge from ships traversing the canal is quite high. The lake itself is notorious for its sudden, rapid, extremely violent windstorms. As well, the two large islands in the west-central part of the lake are active volcanoes.

The easterly half of the proposed canal traverses protected wildlife areas, and disrupts the north-south biological corridor of Central America with a quarter-kilometer wide ditch.

The area is prone to severe, frequent earthquakes. The capital city of Managua was badly damaged by quakes in 1971 and 2014. The westerly half of the proposed canal route, in particular, is above the subduction zone where the Cocos Plate is shoved under the Caribbean Plate.

It’s still not clear that this industrial abortion of a project will actually get built. It may be a scam by Wang Jing for a Chinese toehold in Central America. It may be an effort by Daniel Ortega to cling to power. Or, if the money can be found, and the endemic corruption of the Nicaraguan government overcome, the wretched thing may actually get built. It’s a project for which there is no real demand. The widening of the Panama Canal is nearly completed. From an ecological and environmental point of view, the thing shouldn’t be built at all.2

  1. This is the same Daniel Ortega that President Ronald Reagan demonized, resulting the Contra Affair. Now he’s back in power, this time promoting a kind of crony capitalism that’s quite close to the late President Reagan’s world view. Sometimes irony and ashes are almost indistinguishable. 
  2. Props to WC reader Naomi Schiff for reminding WC of this boondoggle. 

One thought on “A Man, a Plan, a Really Bad Canal: Nicaragua

  1. According to the Center For Climate and Energy Solutions, the BTU’s per ton mile of rail freight beats the pants off ocean freight liners. The “energy intensity” of rail freight’s BTU’s per mile ton is -44.7% while the energy intensity of an ocean freight-liner is a positive 59.5%, thus rail freight is almost twice as efficient — http://www.c2es.org/technology/factsheet/FreightTransportation–so we can rule out altruism for Jing’s incentive–otherwise he’d be laying rails.

    Another search revealed HKND is actually “15 separate holding companies: 1 in Nicaragua, 1 in Hong Kong, 5 in the Cayman Islands, 7 in the Netherlands, and the final parent of the other 14 being Beijing Dayang New River Investment Management Ltd. based out of China.” — Whttp://www.bloggingsbyboz.com/2014/11/who-is-wang-jing.html

    In my nascent experience investing in securities, I’ve learned that anything that writhes with multiple holding companies domiciled in places like the Cayman Islands and the Netherlands is nothing but a store front to middle earth rabbit holes where the money trail is meant to be lost. Wang Jing is smelling of back to get mucho work projects for his new world dynasty.

Comments are closed.