Nicaragua's $40 Billion Canal Would Fulfill Two Centuries of Ambition

Nicaragua's two century old ambitions to build a canal linking the Atlantic and Pacific Oceans, passing through Lake Nicaragua en route, are back on the table. The National Assembly has reportedly given a Hong Kong-based company a 50 year concession to investigate, design, and potentially build the Inter-Ocean Nicaragua Canal (otherwise referred to as the Gran Canal Interoceánico por Nicaragua). It's an audacious plan, one first proposed by Napoleon III in the early 1800s.

Details remain largely speculative at the moment despite the hype, but this is what the 21st century incarnation of the canal would look like: Under HKND Group's plan, the GCIN would begin in Brito on the Pacific side, cross Lake Nicaragua (the nation's prime source of fresh water, pictured above), and proceed via one of six potential routes to one of four potential ports on the Caribbean Sea, as you can see in the map below.

Even under the shortest route, the canal would be at least three times longer than the Panama Canal, across more complex terrain. While the decreased distance in sailing to Nicaragua versus Panama more than makes up for this for ships, building the canal itself is going to be an incomparable engineering challenge.

A $40 billion price tag has been bandied about, but the project's chief advisor told the San Francisco Chronicle that it's really too early to tell if that's really an accurate price—the initial financial feasibility study won't be done for months.

If the project does get built this time, Nicaragua would get a minority share in any profits.

For ships, HKND touts many benefits of the Nicaragua Canal over its neighbor to the south. It says Nicaragua can expect container shipping growth of 3 to 4 percent per year through 2020. And with about a third of the world's container ships already unable to pass through the Panama Canal—it is being expanded—the larger Nicaragua canal could scoop up traffic.

That could save a lot of money and fuel oil for big shipping companies, as HKND says:

For example, going from Shanghai to Baltimore, the Nicaragua Canal route is 4,000 kilometers shorter than the Suez Canal, and 7,500 kilometers shorter than around Cape of Good Hope. At current fuel prices, for an average size container ship, this represents a round trip savings of $500,000 and $1.0MM respectively. For the largest ships the savings would $110/TEU and $327/TEU for the two alternative routes, mostly from lower fuel consumption.

Environmentalists and the political opposition in Nicaragua aren't as bully on the project, however. The leader of the opposition has called the project's approval "unconstitutional, fraudulent, and damaging to the interests of Nicaragua." The fact that it would pass through Lake Nicaragua and would require great amounts of water to fill all the locks has raised immediate and serious environmental questions. For one, how can you let oceanfaring ships sail through the country's largest freshwater reserve without contamination or introducing invasive species?

Then there's the big question of climate change—not so much in how Nicaragua will be affected, but how the melting Arctic and the resulting future opening up of shipping routes there will change the logistics of transcontinental shipping. As it stands now, by 2050 shipping may be able to go straight over the North Pole, at least in summer.

Should the Gran Canal get built, it would be the culmination of efforts dating back to 1825, when surveyors first began studying the route—then in competition with potential canals in Panama and Mexico. In 1826 a proposal in the US Congress to back the project was rejected, on grounds of the weak financial state of the United States, the political instability in Nicaragua, and other factors.

Roughly 25 years later, Cornelius Vanderbilt signed a contract with the Nicaraguan government, granting him the rights to build the canal for 12 years. Vanderbilt established a temporary overland trade route, on what would have been the canal route, becoming the main trade route between New York and San Francisco at the time.

Competition, involving all sorts of political shenanigans and deceptions, including entirely false news stories being planted in the US press about an erupting volcano, continued for the remainder of the 19th century to build a canal in Central America. The Panama Canal, which opened up in 1914 following over three decades of start-stop construction, obviously won out. But Nicaragua, should it decide the monumental costs are worth it, may finally even the score.