Monday, June 10, 2013

Nicaragua's New Canal

Lake Nicaragua - Potential Pathway for New Canal
Source: Yahoo News (AP Photo/Esteban Felix)

This week, big news was announced in an area of transportation often forgotten in conversation – maritime transport! 

On June 5, Nicaragua announced a proposal for a $40 billion canal project, in partnership with HK Nicaragua Canal Development Investment Co. Ltd., a Chinese company (1). Plans for this canal have been thrown around throughout history, given serious consideration most recently in 2006. Since 2006, the canal size and cost has expanded, from 18 to 40 billion dollars (1). This canal is slated to rival the Panama Canal, given the proposed high capacity and size. Canal enthusiasts boast that the capacity could handle ships up to 250,000 deadweight tons, and handle 4.5% of international shipping (1).

The project is expected to take 11 years and require the dredging of 200 kilometers (130 miles) of waterway (2). Opponents to the project cite concern regarding the destruction of Nicaragua’s ecosystems. Other issues raised include the successfulness of the canal so close to the Panama Canal. Eduardo Lugo, a Panamanian consultant who worked on traffic-demand calculations for the Panama Canal expansion, feels that there is not enough demand and trade flow to justify the project’s cost. Additionally, other critics have found the Chinese company’s director listed on several failing companies in Hong Kong, which certainly raises some red flags (2).

Proponents say that the canal project will create 40,000 construction jobs and double the gross domestic product of Nicaragua (2). Given the country’s levels of poverty and tumultuous history, this opportunity for economic and transportation development seems golden to many individuals, including Nicaragua’s President, Daniel Ortega. In response to Lugo’s criticisms, Jason Bittner, director of the Center for Urban Transportation Research at the University of Southern Florida, states that the demand will exist by the time the project is actually completed (2).

If China stays on board, this project gives the country a solid opportunity to exercise its economic power on a global scale. The US continues to have a great deal of involvement in the Panama Canal. This new opportunity in Nicaragua could give China quite a foothold in Central America. The feasibility of the canal and its sustainability remain questionable; many Nicaraguan leaders are calling for more transparency in the decision-making process (3). As Ortega and Nicaragua move forward, the implications for global freight and maritime transportation will unfold with more information in the years to come.


Thanks to John Dornoff for editing this post.

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