At the 13th annual CG-LA Latin America Forum, held in Antigua, Guatemala earlier this month, we had a chance to catch up with Bill Wild, lead developer on the uber-ambitious Grand Nicaragua Canal project being pushed by HKND, a Hong Kong-based company set up specifically for canal development. With several decades of engineering expertise, Wild believes that despite the naysayers, this project is completely feasible and that work could begin as soon as this year.
Infrastructure Investor: Let's talk about the big question: With the existing Panama Canal currently expanding, why move into Nicaragua and what's the opportunity there?
Bill Wild: Nicaragua has always been well-located for a canal. If you've read the stories on it, the original choice of a [location for a] canal across Central America was Nicaragua. The story is around that someone put out a postage stamp with a volcano on it and people decided they wouldn't put a canal in Nicaragua. Well, that's not the true story. The story was that the French guy who was promoting the canal in Panama just wouldn't be budged on it and he managed to push it through and the first canal was built in Panama.
The French company building it spent a long time, a decade or so, trying to build it [and] went bust. Then the Americans took it on and finished it. So there was no real reason to build it in Panama than to build it in Nicaragua. People say Nicaragua was the right choice.
In terms of today, why not just widen Panama? Well, the world doesn't work that way. When people come up with something they think is better than someone else, they don't go and fix their project up, they go and do their project. The view was taken that Nicaragua could better provide a canal or could provide a canal that could be competitive and be a good business model.
Both canals are essentially designed for the trans-Pacific and trans-Atlantic traffic, from East Asia through to the east coast in America through to Europe. That traffic can go through either canal, but the Nicaragua canal would be shorter by a couple of days. Even though the canal itself is longer, the total trip would be shorter.
But the issue or the advantage that Nicaragua had over Panama is the size. New locks at Panama which will take Panama through to 13,000 TEU [twenty-foot equivalent unit], they're not really placed to decide that they're going to make that 50 percent bigger or double. Business doesn't work that way. Panama are committed now to the locks. They're building them, and when they're finished building I'm sure they won't be rushing out to build a new set of new set of locks twice as big.
So the opportunity is there for another canal to be built. Wang Jing, who is the visionary for the project, has set a size of 25,000 TEUs for the containerships. Two years ago people were sceptical about that. They said it was fantasy, you know that there won't be 25,000 TEU containerships. Well, have a look today and there's 25-30 container ships out there now either on the water, being built or on drawing boards that are bigger than 8,000 TEUS. There's a bundle now of maybe ten 20,000 TEU ships that are set to be built. So the ship size now is up to 20,000 TEUs. Will we get to 25,000? Who knows, but probably.
As you mentioned last night in a conversation we had prior to the interview, it's not just the container ships that will be able to facilitate. It would be tankers and other deeper hulled ships as well. Do you see a large demand for that sort of ship of that size?
There's not a large demand, the bulk of the demand is container ships, there's no doubt. The issue is that if you build a canal of this type that will take 25,000 TEU and needs to be 70 meters wide or whatever it is, and 18 meters deep to take those ships, do you make it bigger to take the bulk carriers? To take a 400,000-ton dry weight bulk carrier, you'd need a canal that's 28 metres deep. So that's the question, is there enough traffic to justify that extra depth.
The decision was made originally that yes we would design for 400,000-dry weight to ships, which covers most of the bulk tankers and gas carriers. So that's where we are at present. I'm sure during the design stage we'll optimise that number. Whether we go quite with that or bigger, who knows at this stage.
II: With the 25,000 TEU size, how many ports in the world right now could facilitate that size?
BW: Not a lot. I think there's one or two in the United States are being upgraded to that size. It's an interesting issue and we've talked to the ship owners and that sort of thing – I've got a personal friend of mine who's a shareholder in one of the big shipping companies – and he'll say that they don't want to go to lots of ports with big ships. What they want is to go a route that goes from East Asia through to Europe and comes back, or a route that goes from East Asia across the Central Americas through to Europe and maybe goes all the way around. They don't envision that even on a ship that goes all the way around stopping more than four or five times.
So you're not looking at having lots and lots of 25,000 TEU-capable ports. People say, well, they aren't going to build them, and they're not. Because the problem isn't just the port – it's the port and the infrastructure behind it. You can have a port designed to take a 25,000 TEU ship or several. How do you get the containers out of the port? This is the problem that most people find. There isn't rail connections, there isn't capacity on roads, etc.
What we see is fewer number of ports for the big ships and a lot more train shipment; that's the way it's developing. The big ships will drop off somewhere like on the East Coast of the states. Maybe they only drop off at one port.
II: Speaking of ports, you mentioned in your project presentation that there is a port development component to the canal project. Can you dig into that a little more?
BW: There are six or seven sub-projects, one of which is the canal. The others comprise a port at each end; a free-trade zone, certainly on the western side and one on the east if we want one; some airports; some tourist facilities; and a few others.
The canal really doesn't function without ports, so the ports are very important parts of the canal. We're very committed to have a major free trade zone as part of the port facilities at the western mouth of the canal. In addition, it's not one of the sub-projects, but the government is keen for us to develop a local economic zone adjacent to that but part of the whole economic development infrastructure there.
*Photos by Rolando Alfaro courtesy of CG-LA