The Nicaraguan Canal: Economic Prosperity Versus Environmental Security

IN 2013, HKND, a Hong Kong infrastructure development firm, obtained the rights, after negotiations with the Sandinista government and a unilateral decision by lawmakers, to begin the construction of a 172-mile canal that will slice Nicaragua in two. Valuing the 50-year project at $50 billion dollars, there will be no government involvement on the side of the Nicaraguans nor the Chinese.

         This type of project may make you think of something that resembles the Panama Canal, the 48-mile waterway that connects the Atlantic Ocean to the Pacific. However, the plans in place for Nicaragua could make the existing canal look like a mere creek. The Nicaraguan Canal will be wider, and deeper than its Panamanian counterpart, to allow for the most modern of container ships to pass through.

         It’s not the first time that foreign, imperialist interests have attempted to cut a shipping route through this Central American state. In fact, it’s the 73rd attempt. Various explorers and engineers have toyed with the idea since the 1800’s, but none successfully managed to fully construct a canal. Judging by the amount of opposition from the Nicaraguan people, it seems that Wang Jing’s HKND is perceived as having a high possibility of being successful this time.

         The Sandinistas, led by Daniel Ortega, a prominent actor in the 1979 revolution that brought down the Somoza dictatorship, have stated that with the construction of the canal Nicaragua will be rendered one of the fastest growing countries in the world, a big step forward given it is currently one of the poorest countries by GDP. On the other hand, many Nicaraguans are up in arms against the project, despite the estimation that it could lift more than 400,000 people out of poverty.

         The arguments against the project are strong. To facilitate the construction of the canal, the government has plans to seize thousands of homes of people that live on the route of the planned project. This has sparked protests, road blocks, and the surveillance of chinos, to prevent them from surveying the area of the project. It is likely to displace a large number of indigenous communities that live in the areas surrounding the canal.

         Furthermore, in a situation that resembles the role of the paramilitaries in Colombia, the Nicaraguan Armed Forces is at the disposal of HKND to protect their interests in the case of external threats. As a government that fought against the imperialist force that the United States has represented since the colonial days, it seems hypocritical that the ‘socialist’ Sandinistas would now protect and aid the interests of an equally imperialist entity.

         It doesn’t seem that the environment is one of HKND’s priorities either. In 2015, preliminary activity on the canal began, before a single environmental impact study had been completed. The government says that this process had to be sped up, as the impact assessments could take up to 4 years. They also argued that they wanted to ensure that the investment was secured, before asking Wang Jing to spend $300 million to carry out the assessments.

         As a country that is already plagued with environmental difficulties as a result of its position in the Dry Corridor of Central America, which brings drought and harsh weather for agriculture, it could be catastrophic if the limited supply of water that Lake Nicaragua provides (through which the canal will pass) were to be subject to a toxic disaster. Scientists predict that the dredging alone could bring harsh chemicals into the water supply, in addition to threatening a diverse ecosystem that surrounds the planned route.

         Unfortunately for the vast number of species that will be threatened by the canal, it seems as though Ortega has managed to convince the majority of Nicaraguans that the plan will bring economic prosperity through a multiplier effect that will ripple across the country. The choice, therefore, between environmental security and poverty alleviation seems all too easy in a country where nearly half live on less than $1 a day.

         The Chinese stock market crash that occurred in 2016 has, however, provided a glimmer of hope for many Nicaraguans who are worried about the negative impacts of the canal, having wiped out a significant amount of Jing’s wealth. There is a question mark over how the project will now be financed and the likelihood that it will be carried out. HKND has stated in reports that a mix of debt financing and equity financing through an IPO would be considered to fund the construction. Meanwhile, the colourful fish and birds of the canal are crossing their fins and wings investors will be enticed by a different opportunity before the Chinese get their finances in order.

Ed Bond


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