Nicaragua Canal Project (2014) (blue line). Stars indicate Brito and Camilo Locks. The red line is the border between Nicaragua (above) and Costa Rica (below).
|Original owner||Hong Kong Nicaragua Canal Development Investment Company (HKND Group)|
|Date of act||2013|
The Nicaragua Canal (Spanish: Canal de Nicaragua), formally the Nicaraguan Canal and Development Project (also referred to as the Nicaragua Grand Canal, or the Nicaragua Interoceanic Grand Canal) is a shipping route under construction through Nicaragua to connect the Caribbean Sea (and therefore the Atlantic Ocean) with the Pacific Ocean. In June 2013, Nicaragua's National Assembly approved a bill to grant a 50-year concession to finance and manage the project to the private Hong Kong Nicaragua Canal Development Investment Company (HKND Group) headed by Wang Jing, a Chinese billionaire. The concession can be extended for another 50 years once the waterway is operational. Construction of the canal, estimated to cost 40 to 50 billion US dollars, began in December 2014, with completion due within five years. However, the Nicaraguan government has since failed to present reliable information about whether or not the project can be financed, thus casting doubt over whether or not it can be completed. Scientists are concerned about the environmental impact of the project, as Lake Nicaragua is Central America's key freshwater reservoir.
Construction of a canal using the San Juan River as an access route to Lake Nicaragua was first proposed in the early colonial era. The United States abandoned plans to construct a waterway in Nicaragua in the early 20th century after it purchased the French interests in the Panama Canal.
The idea of constructing a manmade waterway through Central America is old. The colonial administration of New Spain conducted preliminary surveys. The routes suggested usually ran across Nicaragua, Panama, or the Isthmus of Tehuantepec in Mexico.
The history of attempts to build a Nicaragua canal connecting the Caribbean Sea and thus the Atlantic Ocean and the Pacific Ocean goes back at least to 1825 when the Federal Republic of Central America hired surveyors to study a route via Lake Nicaragua. Many other proposals have followed. Despite the operation of the Panama Canal that opened in 1914, interest in a Nicaragua canal has continued. With emergence of globalization, an increase in commerce and the cost of fuel, and the limitations of the Panama canal, the concept of a second canal across the American land bridge became more attractive, and in 2006 the president of Nicaragua, Enrique Bolaños, announced the intent of Nicaragua to proceed with such an project.
On September 26, 2012, the Nicaraguan Government and the newly formed Hong Kong Nicaragua Canal Development Group (HKND) signed a memorandum of understanding that committed HKND to financing and building the "Nicaraguan Canal and Development Project". HKND Group is a private enterprise.
The Nicaraguan Government subsequently approved the Master Concession Agreement with HKND on June 13, 2013 thereby granting the company "the sole rights to the HKND Group to plan, design, construct and thereafter to operate and manage the Nicaragua Grand Canal and other related projects, including ports, a free trade zone, an international airport and other infrastructure development projects." The agreement will last for 50 years and is renewable for another 50 years. HKND will pay the Government of Nicaragua 10M USD annually for 10 years, and thereafter a portion of the revenue starting at 1% and increasing later. Stratfor indicated that after 10 years periodically ownership shares will be handed over to Nicaragua, so that after 50 years Nicaragua would be the majority shareholder.
HKND Group has begun the study phase of development, to assess the technological and economic feasibility of constructing a canal in Nicaragua, as well as the potential environmental, social, and regional implications of various routes. The canal and other associated projects would be financed by investors throughout the world and would generate jobs for Nicaragua and other Central American countries.
Initial findings of the commercial analysis conducted by HKND Group indicate that the combined impact of growth in east–west trade and in ship sizes could provide a compelling argument for the construction of a second canal, substantially larger than the expanded Panama Canal, across Central America. Within 10–15 years, growth in global maritime trade is expected to cause congestion and delays in transit through the Panama Canal without a complementary route through the isthmus. Additionally, by 2030, the volume of trade that a Nicaragua Canal could serve will have grown by 240% from today.
On June 10, 2013, The Associated Press reported that the National Assembly's Infrastructure Committee unanimously voted in favor of the project, with four members abstaining. On June 13, 2013, Nicaragua's legislature passed the legislation granting the concession. On June 15, Nicaraguan President Daniel Ortega and the chairman of HKND Group, Wang Jing, signed the concession agreement giving HKND Group the rights to construct and manage the canal and associated projects for 50 years. An HKND Group press release read, "HKND Group Successfully Obtains Exclusive Right to Develop and Manage Nicaragua Grand Canal for 100 Years". Under the exclusive contract, Wang can skip building the canal (and making any payments to Nicaragua) and instead simply operate lucrative tax-free side projects.
Wang Jing, a Chinese billionaire who leads and wholly owns HKND Group, announced at a press briefing in June 2013 that he had successfully attracted global investors to the 40 billion USD project. In January 2014 Wang Jing and President Ortega issued a statement that construction of the project would begin in December 2014, and that it would be completed in 2019.
On July 7, 2014, a 278 km (172.7 mi) route for the Nicaragua Canal was approved. The route starts from the mouth of the Brito river on the Pacific side, passes through Lake Nicaragua, and ends in the Punta Gorda river on the Caribbean. The proposed canal would be between 230 meters and 520 meters (754.6 feet and 1,706 feet) wide and 27.6 meters (90.6 feet) deep. The Toronto Star noted that Chinese engineer Dong Yung Song said the canal's design called for the creation of a 400 square kilometres (150 sq mi) artificial lake. The water to fill the canal's giant locks would come from the artificial lake, not from Lake Nicaragua.
Daniel Ortega whose government approved the agreement within one week in June 2013 sees the canal as the second phase of the Nicaraguan Revolution predicting that it will pull Nicaragua out of poverty and lead to the creation of 250,000 jobs.
The Moscow Times has reported that Russia will take part in the building of the Nicaragua Canal, viewing the project in part as an opportunity to pursue strategic interests in the region. Construction was to begin on December 29, 2014, and officially started a week earlier. However, due to Nicaragua’s volatile climate and seismic activity, feasibility concerns have emerged over the project’s future.
The Nicaragua canal project has seen business rivalry greatly intensify in late 2014. China Harbor Engineering Company, an experienced construction company, has offered to design, construct, and finance a fourth set of locks, in Panama, where it opened a regional headquarters, which if built to the width of the proposed Nicaragua Canal, would cut across far fewer kilometers, and still cost only 10 billion USD according to the firm. Panama is in a much better financial situation than Nicaragua to afford taking on such debt, and already has a stream of income from its existing canals. Furthermore, the Suez Canal, with financing already complete, has put pressure on Panama, by initiating an expansion in August 2014 to double transit capacity, due to be finished by September 2015, which is before the 3rd set of locks in Panama is completed.
Description of the Nicaragua Grand Canal
The 259.4 km long canal as planned will have three sections. The West Canal runs from Brito at the Pacific Ocean up the Rio Brito valley, crosses the continental divide, and after passing through the Rio Las Lajas valley enters Lake Nicaragua; its length is 25.9 km. The Nicaragua Lake section measures 106.8 km and runs from 4 km south of San Jorge to 8 km south of San Miguelito. The Eastern Canal is the longest section with 126.7 km and will be built along the Rio Tule valley through the Caribbean highland to the Rio Punta Gorda valley to meet the Caribbean Sea.
Both the West Canal and the East Canal will each have one lock with 3 consecutive chambers to raise ships to the level of Lake Nicaragua that has an average water elevation of 31.3 m, range 30.2-33.0 m. The western Brito Lock is 14.5 km inland from the Pacific, and the eastern Camilo Lock is 13.7 km inland from the Caribbean Sea. The dimensions of each of the chambers of the locks are 520 m (1,706 ft) long, 75 m (246 ft) wide, and 27.6 m (91 ft) threshold depth. As locks generally define the limit of the size of ships that can be handled, the Nicaragua Canal is being designed to allow passage for larger ships than those that pass through the Panama Canal. For comparison, the new third set of locks in the Panama expansion will only be 427 m (1,401 ft) long, 55 m (180 ft) wide, and 18.3 m (60 ft) deep.
No water from Lake Nicaragua is planned to be used to flood the locks; water will come from local rivers and recycling using water saving basins. The Camilo lock will be built adjacent to a new dam of the upper Punta Gorda river that creates a reservoir. This Atlanta Reservoir (or Lake Atlanta) will have a surface area of 395 km2. West of the Atlanta reservoir the Rio Agua Zarca will be dammed to create a second reservoir. This reservoir would have a surface area of 48.5 km2 and hold 1,100 gigalitres. A hydropower facility will be built at the dam and is expected to generate over 10 megawatts of power to be used for operations of the Camilo Lock. Both locks would also be connected to the country’s power grid and have back-up generator facilities. It is estimated that each lock uses about 9 megawatts of power.
At each oceanic entrance of the canal breakwaters and port facilities will be constructed. The Pacific port will be named Brito Port and the Caribbean one Aguila Port. Initially these two ports will help during construction and later become international ports. Their design capacity is 1.68 million TEU/year and 2.5 million TEU/year, respectively. Existing port facilities at Corinto and Bluefields will be improved to allow for shipment of material to the entry ports under construction. Fuel storage sites will be placed at the two port sites. Four lighthouses will be constructed at the entrances to the East and West Canals. In addition, the channel entrance on sea will be marked on both sides with a large sailing buoy about 2 miles offshore and 2 light buoys will mark the passage through Lake Nicaragua. Navigation and lock control centers will be established.
Appropriate road improvements are planned. The Pan-American Highway would cross the canal via a bridge. Nicaragua Route 25 (Acoyapa-San Carlos) on the eastern side of Lake Nicaragua would get a ferry service. Both ports would get public road connections. HKND plans to construct a private gravel maintenance road on both sides of the canal.
The estimate for the workforce in 2020 when the project is completed is 3,700 people, and 12,700 in 2050 when traffic has increased.
Transit time will about 30 hours. It is projected that by 2020 3,576 ships will pass the canal annually. The transit rate is expected to increase to 4,138 by 2030, and to 5,097 by 2050. For comparison, the Panama Canal handled 12,855 transits in 2009.
On December 22, 2014, Monday, the China-backed canal announced construction started in Rivas, Nicaragua. HKND Group Chairman Wang Jing spoke during the starting ceremony of the first works of the Interoceanic Grand Canal in Brito town. Construction of the new waterway will be run by HKND Group—Hong Kong-based HK Nicaragua Canal Development Investment Co Ltd., which is controlled by Wang Jing.
According to the plans of HKND the project entails the development and building of the canal as well as a supporting infrastructure as follows (status January 2015, modifications may still be made).
There will be four general phases. The pre-construction phase included getting permits, acquiring land and machinery and finalizing designs and plans. The early construction phase started in December 2014 will last through September 2015: it secures access to construction sites, provides the critical infrastructure and mobilizes the workforce. The construction phase (September 2015 to March 2020) will be the time to dig the canal and built the locks plus their infrastructure. The commissioning phase (April 2020 to June 2020) includes testing of the lock operations and training of lock and tug boat operators.
HKND describes the project as the largest civil earthmoving operation in history. Most of this will consists of dry excavation to form the canal with an estimate of 4,019 Mm3 material of rock and soil. There will be 739 Mm3 freshwater dredging (Lake Nicaragua) and 241 Mm3 marine dredging. Marine dredging of the oceanic access canal will be required on the Pacific side for 1.7 km and on the Caribbean Sea for 14.4 km. Disposal of excavation material will be done usually along the canal in designated disposal areas typically within 3 km of the canal.
HKND estimates that about 50,000 people will be employed during the 5-year construction, about half of them from Nicaragua, 25% from China, and the remainder from various countries. 1,400 workers will be in office or administrative positions and the rest in the field. The management offices will be rented or purchased near Rivas. Workers will live in one of nine camps, which besides food and shelter would also provide health care and security. These are “closed” camps, that is workers cannot leave the camp unless part of an organized activity. The work schedule calls for 12 hour shifts for seven days a week. Domestic workers work two weeks and get one week off, while foreign workers are 6 weeks on and get 2 weeks off (management) or 22 weeks on, 4 weeks off (blue collar workers).
Project costs are estimated in the region of 40 to 50 billion US dollars  Beside private money provided by Wang Jing at the start-up, further influx of financial support is expected from investors. An IPO was reported to be in preparation by the end on 2014. XCMG, a state-owned Chinese construction company will provide machinery and take 1.5 to 3% of HKND shares in return.
As of the end of 2014 no major investors have been named. There has been speculation that the Chinese government provides financial backing for the project, but China as well as Wang Jing have denied this.
Risks and opposition
Wang Jing admitted that the project has financial, political and engineering risks. With the high cost of the project that independently has been estimated to be about 100 billion US dollars it remains to be seen if it will be fully funded. The project is supposed to be completed in 2020, but Stratfor, an analyst agency, believes this target to be an “unrealistic goal”. As the Panama Canal still has capacity and is undergoing a renovation, projections for the traffic of the Nicaragua canal may be optimistic. Further, a coast-to-coast railway line may be built by China in Honduras and could affect utilization of the canal. Also, North American land bridges in Mexico and the United States will compete in the traffic between Asia and the east coast of the United States. Thus, competition may undermine the economic viability of the Canal.
A major environmental concern is the impact of the project on Lake Nicaragua, the largest source of freshwater in Nicaragua. An oil spill would have serious and lasting consequences. Other problems would be the impact of dredging bringing up toxic sediments, the disruption of migration patterns of animal species, and the potential to introduce invasive species to the Lake. Environmental studies had not been released by HKND when the project officially started in December 2014.
The project faces opposition within Nicaragua. Fabio Gadea, Ortega’s political opponent, indicated that the government violated democratic principles when making the agreement with HKND and that the agreement curtails Nicaragua’s sovereignty. Opposition leader Eliseo Nuñez called the deal “part of one of the biggest international scams in the world.” Legal challenges that the deal violates constitutional rights were rejected by the Supreme Court and a retrospective rewriting of the constitution placed HKND beyond legal challenge. HKND has been granted the right to expropriate landowners within 5 km on each side of the canal and pay only cadastral value, not market value for property. Wang Jing, however, promised to pay fair market value. The estimates of the number of people who will be displaced range from 29,000 to more than 100,000. There are indications of local opposition to intended expropriations. Thus, according to an activist leader an unrest in Rivas in December 2014 in opposition to the canal left two protesters dead. Studies of the social impact regarding displacement of people had not been released when the project officially started.
The apparent lack of experience of Wang Jing and his HKND Group in large-scale engineering has been cited as a risk. While the reserves of the Nicaraguan National Bank serve as collateral on part of Nicaragua, HKND has no such potential liability.
There is concern that the project might not get finished and the country’s situation would deteriorate. Due to Nicaragua's volatile climate and seismic activity, it has also been questioned whether or not the canal is feasible.
Protests against the construction of the canal erupted shortly after the official ceremony marking the beginning of the construction. Farmers protested against the possible eviction from their lands due the construction of the canal.
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