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Mystery Surrounds Building of Nicaragua’s $40 Billion 'Phantom Canal'

It is difficult to tell if the canal, which will be an alternative to the Panama Canal, will become a reality or is just propaganda.
May 16, 2014, 7:30pm
Image via Flickr

By Rafael Castillo and Amalia Morales

The Interoceanic Canal — the biggest infrastructural project in the history of Nicaragua — is also known as the Phantom Canal, or the project that will never happen. The canal, which will connect the Atlantic coast with the Pacific — as an alternative to the Panama Canal — has been on President Daniel Ortega’s agenda for several years, without anyone being able to successfully assert whether this project is real, or mere propaganda.

Those who do believe the project is actually happening are the Nicaraguan peasants who live in the way of the possible canal route. They are certain that Chinese citizens, along with military and police, are installing numbered cinder blocks in front of their homes, and then leaving.

“Is this canal really going to happen? No one has told us anything,” Carlos González, a local cattle farmer with over 1500 acres of land that has been flagged with cinder blocks, told VICE News.

For decades the waters of the Tule River in Río San Juan — almost 200 miles from southeast Managua, Nicaragua — have served as drinking water for the cattle that pass through González’s farm. He has spent months wondering what will happen to his property now that it has been marked and could become part of the route for the famous interoceanic canal, which Ortega’s administration has proposed building with Chinese capital.

The novelty here is that the government of the Russian Federation has expressed interest in participating in the Interoceanic Canal’s construction, as Deputy Minister of Foreign Affairs Sergei Ryabhov has confirmed. This indicates other governments’ interest to participate in this project, the details of which — such as information about the involved investors, and whether or not these are private or state funds — have been kept discreet.

Wang Jing — the businessman behind the Hong Kong Nicaragua Canal Development Investment Company (HKND Group), which received the concession to administer the canal for the next 100 years — has been questioned multiple times on this subject. In July 2013 he told several media outlets that the investors would be revealed in the following months. This has yet to happen.

The surveying of the property is already taking place, and it seems surprising that basic information still remains a mystery, when the canal’s construction could begin as early as December. No one really knows who the investors are, and no one knows why a businessman with no previous experience in infrastructural construction is involved in a project with an estimated cost of approximately $40 billion, either.

According to the website of the HKND Group, the Interoceanic Grand Canal (GCI) of Nicaragua would be bigger than the Panama Canal, to satisfy the estimated growing demand.

“Global shipping trends demonstrate that in the future a significant percentage of the global fleet will either need to, or choose to, look for an alternative route that connects the Eastern Coast of North America, Gulf Coast of the United States, and South America with Asia," the group says.

The Nicaraguan government hopes that just the canal’s construction could multiply the current Gross Domestic Product by up to 30 percent in 2018, according to announcements by Ortega in May of 2013.

“The project will accelerate the country’s economy and there will be great need for manual labor, to the degree of being able to offer jobs to the rest of Latin America,” Ortega said at the time, in defense of this project, which faced strong political opposition because of the possibility of Chinese participation.

But for the second most impoverished country in the hemisphere, perhaps it is the millions of dollars that are to be invested, and the growth that has been estimated, that could be enough to allow the massive intervention in the country’s primary source of fresh water: Lake Nicaragua.

The lake, which occupies a great part of the national territory, has the potential to generate 38 thousand cubit meters of water per citizen per year, according to data from the Food and Agriculture Organization of the United Nations.

This is why it is not surprising that Jing has said that his firm has already spent $100 million into environmental impact studies to analyze the effects that would result from the construction, and to see how feasible the construction actually is.

It strikes some as strange, however, that it is still not clear whether these are private funds or state funds, originating from the Chinese government, through the Chinese Development Bank (CDB), which has previously supported the growth of other ventures Wang has been involved with. It has been over a year since Wang stated that he would publicize the list of investors’ names, but since that point he has been generally ambiguous about the CDB’s interest in this project.

Since then, Wang has appeared in very few interviews, but insists that he does not maintain a relationship with the Chinese government — a government that has previously expressed interest in transoceanic megaprojects and has attempted to expand their influence in Central America.

Image via Flickr

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