Latin America Trade
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Chinese whispers: Who wants to bet on the ‘Nicaragua Canal’?
For centuries since the colonization of the New World, entrepreneurs have dreamed of building a canal spanning Nicaragua to make it easier to tap Asia’s riches.
Sixteenth century Spanish conquistador Hernan Cortes yearned to cleave the isthmus, and ever since, French, American and Dutch financiers have all made abortive, Quixotic attempts to bisect the Central American country’s volcano-studded terrain.Now it’s the turn of the Chinese. And skepticism is as strong as ever.
The Hong Kong-based company that won a concession to design, build and manage a $40 billion canal to rival Panama’s says it has been lured by an energy renaissance in the United States and its belief that world trade could double by 2030.
The company, HKND Group, was registered last year in the Cayman Islands. This would be its first infrastructure project, and its 40-year-old boss, Wang Jing, is relatively unknown.
There is still no firm route for the proposed canal, which would cost about four years’ worth of Nicaragua’s annual gross domestic product, and would likely be three times longer than the 48-mile (77-km) Panama Canal, which took a decade to build. Engineers also note that the geography poses some major challenges - not least a 20 foot tide differential between the two coasts.
For all those reasons, investors and infrastructure experts are highly dubious that a canal will ever be built.
“Are international shipping companies going to trust a one-guy shop with minor telecommunications experience to be the system integrator on a $40 billion project in a country whose transparency is already subject to question?”, said Evan Ellis, a professor of national security studies at the U.S. Government’s National Defense University.
Greg Miller, a shipping consultant at IHS Fairplay, a global maritime intelligence company, was also highly skeptical.
“The Nicaragua canal will never be built and the only people who’ll financially profit from this proposal are the consultants paid to do the feasibility studies,” he said.
Rosario Murillo, the wife of President Daniel Ortega and his government spokeswoman, said at a ceremony with Wang after the concession was granted: “This is a day of miracles, of wonders.” Government officials declined to comment on skepticism that has emerged since then.
Betting on Energy BoomHKND Group is a unit of holding company the HK Nicaragua Canal Development Investment Co., Ltd. which was incorporated last year, according to the Hong Kong Companies Registry.
It bases its projections for the future success of a Nicaragua canal on the U.S. shale revolution, which has unlocked decades of oil and gas supply. If the United States wants to export more to Asia, the theory goes, it will need to send more and bigger ships from Gulf Coast refineries by canal to the Pacific, and Panama won’t be able to handle it all.
“This project can be undertaken now, and only now, thanks to the discovery of prodigious amounts of gas and oil in the United States,” said Ronald MacLean-Abaroa, HKND Group’s spokesman, who is a former mayor of Bolivia’s La Paz and one-time World Bank governance specialist.
“Three years ago that didn’t exist,” he told Reuters in an interview, saying the company would seek to raise private financing in Asia. On its website, the company also pointed to growth in U.S. exports of iron ore, coal and grains.
The Panama canal is already expanding to accommodate growth in traffic, and experts say the shale oil boom could benefit a Nicaraguan project, if it is ever completed.
Maersk Line, the Panama Canal’s top customer, has rerouted services from Asia to the East Coast of the United States via the Suez Canal. Its newest ships are too big for the Panama Canal, even after a third lane is built.
A spokesman for Maersk Line Central America and Caribbean said it was too early to speculate on the Nicaragua project, but it would be monitoring developments.
“We applaud bold initia
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