Nicaragua’s Canal: Show Us The Money

First, this isn’t a new idea. It’s been around since before the Panama Canal. I have said before that I have serious doubts that it will ever happen. First, no one ever consulted the Nicaraguan people, just as no one ever consulted the Panamanians when the US created the Canal Zone and built the Panama Canal. The Nicaraguan people oppose their President’s give-away. Second, environmentalists fear an environmental disaster and there have been no environmental studies to alleviate their concerns. Third, if the intention is to compete with Panama, how do you really compete with a Canal that has an existing infrastructure of ports, international banking, maritime registry, bunkering and services, and the second largest free zone in the world with additional free zones under construction? Fourth, and most importantly, the numbers don’t make sense.

Now comes this from the Administrator of the Panama Canal …

April 14th, 2015 ( The administrator of the Panama Canal, Jorge Luis Quijano, said Monday that Chinese state builders are wary of becoming involved in the Nicaraguan canal project, also known as the Nicaragua Interoceanic Grand Canal, and that Chinese state companies have no interest in financing the project.

“I just came from China and builders told me that no state company is interested in financing the project,” Quijano said during the opening session of the XII Panama Maritime Conference in Panama City, Panama, where more than 400 maritime industry leaders have been convened since Thursday.

Quijano also added that Dutch Prime Minister, Mark Rutte, expressed his country’s skepticism of the Nicaraguan project and its commitment to the Panama Canal.

Quijano said such a large investment (the developer behind the Nicaraguan Canal says it is raising $50 billion) is not justifiable as the Panama Canal is already capable of handling the vast majority of the world’s interoceanic shipping needs, and its capacity will only increase after an ambitious expansion project already underway is completed.

Panama began the expansion project in 2007 with an investment of $5.2 billion. The project was scheduled to be completed in October 2014, but several setbacks, including disagreements with the primary contractor, have pushed the estimated completion of the project to the first quarter of 2016.

The expansion will allow the Panama Canal to handle container ships with nearly three times the capacity as today, up to 13,200 containers per ship.

Uneasiness has clouded The Nicaraguan canal project since Hong Kong Nicaragua Canal Development Group, or HKND, a supposedly private company headed by Chinese entrepreneur Wang Jing, won a no-bid concession in June 2013 to design, build, and operate the canal.

To date, HKND has not disclosed the names of any investors who are funding the canal.

Despite this, Wang, nor the Nicaraguan government, have expressed any concerns that they will be able to obtain the financing necessary to complete the project.

In an interview with Reuters last year, Wang said there were a number of ways in which he and his company will be able to raise capital, adding that the project “doesn’t require $50 billion in cash

“A large portion of the $50 billion is actually in materials, including cement and steel. We have signed contracts with a well-known steelworks and a cement plant to jointly build facilities in Nicaragua. What these plants produce will be used to build the canal,” Wang said, adding that the arrangement would provide tax breaks and allow his group to control steel and cement prices.

At the time of the interview, Wang said he had so far invested some $100 million of his own cash, and that he “will keep investing until the project succeeds.”

The Nicaraguan canal project has sparked dire warnings from environmentalists, Despite the Nicaraguan government’s claim that canal construction will avoid delicate environmental areas and indigenous territories.

What effect the canal will have on Lake Nicaragua, the largest lake in Central America through which the route will pass, is of particular concern as it’s a key source of fresh water.

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