Yet again, Nicaraguans are letting their longing for a trans-oceanic canal get the better of them
The Economist – NOT since the civil war of the 1980s have so many helicopters been clattering over remote parts of Nicaragua. But now the guys squinting down through the tree canopy are in suits: lawyers and business consultants from the United States, Australian engineers, British environmental auditors, even Chinese executives. Their per diems are being paid by Wang Jing, a Chinese businessman whose $40 billion quest is to build a canal from Nicaragua’s Atlantic coast to its Pacific one.
The dream of such a canal, three times as long as the one that cuts through Panama, is centuries old, and has made fools of all who ever believed in it. But Mr Wang has already pulled off one remarkable feat: he has persuaded the former revolutionaries in the Sandinista government to put Nicaragua’s sovereignty in hock to make the dream come true.
To do so, he has deployed little more than his personal chequebook and a bit of old-fashioned swagger in the style of Cornelius Vanderbilt, the tycoon who blazed a trail by shipping migrants from the eastern United States to its west coast via Nicaragua during the Gold Rush years of the 1840s and 1850s. “He’s a person who radiates confidence,” says Manuel Coronel Kautz, president of Nicaragua’s canal authority. “His company headquarters alone would cover half of Managua.” The chutzpah has played well with a government eager for someone new to believe in now that its former benefactor, Venezuela’s Hugo Chávez, has died. “This lad is a revolutionary,” Mr Coronel purrs.
Since June, when the Sandinista-stuffed National Assembly rubber-stamped a law granting a 50-year concession, renewable up to 100 years, to Mr Wang’s HKND Group, many have wondered whether the 40-year-old telecoms boss is a crank. In August the Associated Press reported that in many countries, including Nicaragua, where he has claimed to be doing business, his companies are barely noticeable. Although both Mr Wang and President Daniel Ortega insist that the project will go ahead, people who have worked with HKND say it has more of an option to build than an obligation. In effect, the cost of the option is the tens of millions of dollars that Mr Wang is expected to pay from his own pocket to find out which route is most physically and financially feasible.
Hence ERM, a British consultancy, is looking at the environmental and social impact of digging a deep channel through Lake Nicaragua, one of the largest in Latin America, and carving through ancestral indigenous lands. Australian engineers are pondering how to remove millions of truckloads of dirt in a country with no large excavators, let alone nearby roads or railways. McKinsey, a business consultancy, is said to be working out how the project could make enough money to entice sovereign-wealth funds to bankroll it.
The economic case is not easy to make. And if the engineering challenges are too severe, even some supporters of the project say it may be impossible to raise the billions of dollars necessary to go any further. HKND argues that large volumes of globally traded goods are being carried on ships already too big for the Panama Canal, even after its current expansion. Nicaragua’s canal, with twice the draught of Panama’s, would aim to accommodate such giants. But world trade is sluggish; and meanwhile, new routes may develop through the Arctic.
The project may also rest on shaky legal ground. Gabriel Álvarez, a law professor at Nicaragua’s National Autonomous University, says there have been 32 charges of unconstitutionality—a number he reckons unprecedented in Nicaragua. He points out that the law gives the company unfettered and tax-free rights over vast tracts of land, which would violate the country’s sovereignty. It also requires the supposedly autonomous Central Bank to waive its right to sovereign immunity, which has alarmed economists.
At the same time, the government pledges to expropriate all land along the chosen route at potentially below-market rates, which has outraged indigenous groups and businessmen. In return, the Nicaraguan state gets no more than $10m a year, plus a stake in the company that rises about ten percentage points every ten years. “It’s like there’s an unwritten slogan: ‘The canal at any cost’,” says Manuel Ortega Hegg, vice-president of Nicaragua’s Academy of Science.
Mr Coronel rejects such arguments. He believes that the company will work in the interests of Nicaragua, overseen by a canal commission that will safeguard sovereignty. He says the economic benefits of investment and jobs will easily outweigh the costs (though he acknowledges that much of the construction may be carried out by Chinese technicians). Mr Wang, he adds, was given the concession because HKND was prepared to raise the money itself. Mr Coronel is coy about where the cash would come from, but hints that he hopes for official Chinese investment. “No American company would do this if their government wasn’t supportive,” he says. “It must be the same with the Chinese.”
Among those who oppose the concession are many who, under different circumstances, would see it as a lifesaver for impoverished Nicaragua. Like many in Central America, they believe the first country to find a new way across the isthmus would reap enormous gains. The trouble, they say, is that Mr Ortega’s Sandinistas control all organs of government, including the Supreme Court, which means that legal and environmental challenges are unlikely to get a fair hearing. There was almost no public debate before the law was approved.
As a result, Mr Wang’s contract may not be safe if the government changes. That does not worry Mr Coronel. The white-haired son of one of Nicaragua’s most famous poets, he has long dreamed of the canal as a way of raising Nicaraguan living standards—an unfulfilled pledge of the Sandinista revolution. His only concern, he says, is that, at 80, he may not live long enough to see the dream fulfilled. But by then, in Mr Ortega’s words, Nicaragua will have reached the “promised land”.
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