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Nicaragua. The New Canal joining two Oceans

In December work will start on a new canal in Nicaragua joining two oceans. The cost will be 40 billion dollars and work will take 5 years. Questions from Environmentalists. Chinese interests. The Russian moves.

The plan of the mega-canal will join Punta Gorda (facing the Caribbean) with the estuary of the river Brito facing the Pacific and will be 278 km long, from 230 metres to 520 metres wide and 28 metres deep. Environmentalists, both local and international have raised grave questions as to the wisdom of passing through Lake Nicaragua causing unknown ecosystem damage and spoiling this unique lake of water which is one of the jewels of this Central American country. Also the area is known for its volcano and this can be a grave seismic risk which is a further factor having to do with the wisdom of such a project.

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The project has been contracted to the Hong Kong Nicaragua Canal Development Investment Company (HKND). HKND will operate the Canal for 50 years, with the option of extending for another 50 years. The contract foresees the setting up of another 6 companies for related projects: a) earth moving; b) 2 new ports; c) new roads; d) duty free zone commerce; e) tourist resorts; f) international airport. An electric power station is also planned as is a cement factory and a steel plant with the necessary infrastructures. The China Railway Construction Corporation is an associate partner for technical expertise as is the McKinsey as consultants.

Who benefits?

The Canal is not a new idea for Nicaragua. Already in the 19th Century the French played with the idea of using the San Juan river as a basic track for constructing a canal that would join the two oceans. The USA also thought of following this route but abandoned it and went for the Panama Canal. The decision has now been made and work will begin at the end of the year and should be completed in 2020.

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Evidently the project has sparked heated debates between technical experts and academies. Professor Jean-Paul Rodrigue of Hofstra University recently expressed the following criticism. “I recognise that the technical side of the project is possible but I’m not convinced however of the overall ability of the Hong Kong Nicaragua Canal Development Investment Company to carry out this project nor of the plan’s commercial value. Moreover the success of the Panama Canal at every level is due to the overall efficient maintenance management of the Canal guaranteed by the Panama Authority. I doubt that Managua can guarantee the same level of efficiency”. Several business and technical experts take the opposite view.
According to Rod Nairn, the delegate administrator of Shipping Australia, “the new Canal will bring huge benefits to commercial business in that part of the world with significant impact on Asia-Pacific trade. To the question that maybe the Nicaraguan project is simply a copy of the Panama Canal, some experts have pointed out the current improvement work on the Panama Canal to deepen the canal by 13.8 metres will permit the transit of the super-tankers carrying oil and gas (the super-tankers carrying GNL-liquefied gas).
In this case the Nicaragua Canal justifies itself because of its deeper depths, allowing the super-tankers trawling the super-highways of the sea – SLOC Sea Lanes of Communications). In particular the weight of the tankers using the Panama Canal is around 150,000 gross register tonnage lord (GRT) whereas the tankers which will pass through the future Nicaragua Canal will weigh up to 400,000 tons taking advantage of the new canal depth of about 28 metres.

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From the point of view of ocean commercial traffic and especially the large container ships however the Panama Canal will see a significant increase compared to what is there today. These large container ships that pass through the Panama Canal are called Panamex because they were made for the Panama Canal and the increased capability of the Canal will facilitate a significant increase in the traffic flow. In fact plans are nearing completion for new Panamex tankers with a capacity of carrying 50% more load than the present tankers. It is an important new strategy for maritime commercial transport. This expansion of the Panama Canal will only play a significant role when problems of new investments in the infrastructure of the canal and its loading and off-loading ports are resolved to cope with the new generation super-port Panamex tankers. Consultancy Firms in maritime traffic calculate that the ports in the USA will have to invest 1,3 billion dollars in new infrastructures and correlated facilities. Recent reports say that Houston and New York are ready while work is going on at Norfolk and Savannah. Outside the USA we have container-ports in Jamaica (Kingston), in Colombia (Cartagena and Buenaventura) and in Brazil (Santos and Suape).

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From Beijing’s (China’s) point of view the Nicaraguan concession stretching over a 100 years represents a notable success and especially since it allows China to control for a considerable number of years its ‘own’ inter-ocean canal. In research carried out by the Stratford study centre it is underlined how the Nicaraguan concession fits perfectly into Beijing’s strategy of controlling as many sea lanes as possible and having commercial lanes outside the control of western nations.
This project is therefore a very important element of affirmed Chinese geo-economic strategy, now turning to the Caribbean (after having ‘invaded’ the European Union, Africa and South America with its businesses and products). For some time now China has been signing bilateral commercial agreements also with small, individual Caribbean countries like Barbados, Bahamas, Jamaica, Guyana, Suriname and Antigua. Another very impressive business deal for Hong Kong is the Hutchinson Wampoa which controls and manages at Freeport in the Bahamas all container business. Further agreements have been signed between China and Venezuela. Experts predict that by 2020 Chinese investment outside its own borders will amount to 1000 billion dollars.

Moscow is not sleeping

Last July President Putin went to Nicaragua to discuss with the government a possible role for Moscow in the Canal Project. The fact is that this is an alternative to Panama controlled by the USA. Diplomatic sources say the visit was to offer political and military support during the construction of the canal. The government of Ortega had already agreed to Russian ships and planes patrolling the Nicaraguan coast both on the Pacific and Caribbean Sea. The agreement stipulates that these patrols will begin in mid 2015. In the meantime Nicaragua will allow the Glonass on its territory, the Soviet world satellite navigation system.

Vladimir Putin, Daniel Ortega

Many analysts agree that if Russia decides to create a naval base in Cuba, the Nicaraguan Canal will be of immense importance to Moscow, because of its closeness to the USA. This will be Moscow’s response to the strengthening of a NATO presence in Eastern Europe. At the same time the Canal will enable Russia to increase its trade relations with Latin America. Thanks to the Nicaraguan Canal, Russia can open a new door to Latin America and increase its influence in the region. Quite rapidly it could transfer its Atlantic fleet to the Pacific.
Traditionally the USA controlled the maritime trading lanes, as in the Strait of Malacca, Singapore, Gibraltar, the Suez and Panama Canals. The appearance of the Nicaraguan Canal is a new challenge to Washington. The White House so far is not putting up an energetic blockage. (M.L.)

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