BY CLIFFORD F. LYNCH
fastlane
A distant dream?
ON JUNE 14, NICARAGUAN PRESIDENT DANIEL ORTEGA
signed a 50-year concession granting to HK Nicaragua Canal
Development Investment Co. (HKND) the right to explore—and
possibly build and operate—a canal between the country’s Pacific
and Caribbean coasts. As if digging a canal were not ambitious
enough (experts say it would cost $40 billion and require the excavation of over 125 miles of new waterway), the proposed project
would also include a pipeline, two ports, two airports, and a cross-country railroad. The timing is interesting in that the concession
comes right before the opening of the $5.25 billion expansion of the
Panama Canal. Even more interesting is the fact that HKND is a
Chinese company whose owner’s experience lies
in telecommunications, not canal building.
Building a canal across Nicaragua is not a new
idea by any means. As far back as colonial New
Spain, the concept has been studied, surveyed,
and ultimately abandoned. In 1828, Antonio Jose
Caoaz, Guatemalan minister to the United States,
presented the idea to John Quincy Adams, who
proved a receptive audience. The U.S. dove into
the project, spending considerable time and
resources on it. However, the effort was soon
derailed by instability in Nicaragua.
In 1882, the French, who had been constructing
the Suez Canal, decided to tackle the Central American canal project
but chose Panama as the venue. Under the leadership of Ferdinand
de Lesseps, work began on a ground-level canal. However, the project was plagued from the start by yellow fever, malaria, and financial
difficulties. The plan was changed to a lock canal, but in 1889, the
company was forced into liquidation, and another new company was
formed in France only to fail five years later.
By 1889, Cornelius Vanderbilt and others had begun construction of a canal in Nicaragua, but in 1893, a stock panic halted that
effort. Finally in 1902, Congress voted to go back to Panama and
gave President Theodore Roosevelt $40 million to buy out the
French and continue the project. Construction was not easy and
came at an enormous human cost. Over 10,000 workers had
already died between 1882 and 1888, primarily from disease.
Another 6,000 would die before the canal was finally completed in
1914. The expansion currently under way is scheduled for completion in 2015.
So why do we need another canal? There are several good reasons
to have a second canal across the Americas. Obviously, the threat of
terrorism always hangs over our heads. The
loss of the Panama Canal would create an
almost unimaginable global shipping crisis.
From an operational perspective, just last
month Maersk introduced the first of its Triple
E ships. As of today, they are too large for any
port in North America and will be too large to
traverse the enlarged Panama Canal. The Triple
Es are 1,312 feet long and 194 feet wide. The
new Panama Canal lock will be 1,400 feet long,
but only 180 feet wide. Finally, the new canal
would be good for
Nicaragua. Estimates are
that it would double the per-capita GDP of the country.
But will it really happen? I
wouldn’t bet on it. Certainly,
canals are easier to build
than they were 100 years
ago, but destruction of pristine rivers and lush jungles
in Nicaragua would be an
environmentalist’s nightmare. Also, there are 12
active volcanoes in Nicaragua, some of which
erupt on a fairly regular basis. Some experts do
not believe even $40 billion is enough for such
an ambitious project, and others have suggested this may be some sort of scam by Ortega,
who is not the most trusted leader in Central
America. Finally, there is a concern by many
that if the canal were actually built, the
Chinese would hold too important a position
in global commerce.
And by the way, there has been no indication
of where the $40 billion is coming from. ;
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider
of logistics management advisory services, and author of Logistics
Outsourcing – A Management Guide and co-author of The Role
of Transportation in the Supply Chain. He can be reached at
cliff@cflynch.com.
