ALMOST EXACTLY TWO YEARS AGO, I WROTE IN THIS COLumn about Nicaraguan president Daniel Ortega’s signing a 50-year
concession granting the Hong Kong Nicaragua Canal Development
Investment Co. (HKND) the right to plan, design, construct, and
operate a canal between the country’s Pacific and Caribbean coasts.
This ambitious project supposedly would cost $50 billion and require
the excavation of 125 miles of new waterway. In addition to the canal,
construction would include two ports, two airports, a pipeline, and a
cross-country railroad.
Besides the almost overwhelming scope of the project, three things
about it are of particular interest. First of all, HKND
Jing, has a background in telecommunications, not
canal building. And finally, no one has the vaguest
idea where the financing would come from. Wang
claims to have a number of investors but has not
identified a single one. Most dubious of all is his
stated commitment to have the project completed in
2020. Keep in mind that the Panama Canal expansion, begun in 2007, is not scheduled for completion
until next year.
The idea is not a new one. As far back as colonial New Spain, the
concept of building a canal across Nicaragua has been studied, plotted
out, and even started several times only to be abandoned. Frankly, by
now I thought the project would have quietly gone away. However,
on Dec. 22, 2014, an official groundbreaking was held, and a small
amount of construction has taken place. Even more significantly, on
May 31, 2015, HKND presented to the Nicaraguan government an
Environmental and Social Impact Assessment report prepared by the
British company Environmental Resource Management (ERM). As
for the specific findings of the report, none of the details have been
released. A statement issued by HKND simply noted that the report,
which consists of 14 volumes, 11,000 pages, and 2. 75 million words,
“covers a wide range of scientific disciplines including geology, soil,
groundwater, surface water, air, noise, freshwater and terrestrial ecosystems; while the social studies cover social resources, community
health, and cultural heritage; together with local economy and employment.” The Grand Canal Authority says that the next step will be to
submit the findings to the Environment Ministry.
Whatever the conclusions are, there is almost no one who doubts
BY CLIFFORD F. LYNCH fastlane
Mission improbable?
that this canal would have a disastrous impact
on Nicaragua’s environment. Hundreds of
thousands of words have been written about
the threat to pristine rivers, lush jungles, and
endangered wildlife. There is, of course, the
political reality that if Daniel Ortega wants it to
happen, it will. The major uncertainty involves
the financing. Will $50 billion be enough, and
if such an amount is available, will it come
from entities that we would rather not see gain
a strong foothold in Central
America?
The larger question is
do we really need another
canal? Certainly, there are
some compelling reasons to
have a second canal across
the Americas. Obviously, the
threat of terrorism always
hangs over our heads, and
the loss of the Panama Canal
would create an almost
unimaginable global shipping crisis. From an operational perspective, the
canal could open up more routes for the new
“superships.” In early June, Maersk announced
an order of 11 second-generation Triple-E ships.
As of today, they are too large for any port in
North America and will be too large to traverse
even the enlarged Panama Canal. Finally, the
new canal would pump up the Nicaraguan
economy. Estimates are that it would double
the per capita GDP of the country.
Even so, while I will stop short of calling the
project impossible, based on what we know
now, I think it is highly improbable.
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.
