Papers filed for Nicaragua's $50bn canal

Even as the Panama Canal’s new expanded locks are preparing to open for shipping within the next 12 months, HKND is developing its own even larger canal in Nicaragua in the face of many naysayers.

It doesn't take a boatload of time asking around to discover that a large portion of the players in the infrastructure investment and development world have serious doubts concerning the necessity and feasibility of an inter-oceanic canal in Nicaragua.

Since the most recent commitment to develop a super-sized canal in the Central American nation was undertaken by the Hong Kong Nicaragua Canal Development (HKND) Group two years ago following granting of sole development rights by the Nicaraguan government, naysayers the world over have united in disbelief that there is a true business case for development of a canal capable of servicing 400,000-ton dry weight bulk carriers and 25,000 TEU ships (for comparison, the expanded Panama Canal will be capable of allowing passage for 13,000 TEU ships). 

In casual conversation, one source close to the developers of the expanded Panama Canal likened the Nicaragua plan to a fairy tale, noting that it has been veiled in mystery since its inception even to those qualified investors who might be interested in playing a part.

Despite this chorus of detractors, Chinese billionaire and HKND chairman and chief executive Wang Jing, a mogul known primarily for his dealings in telecoms and pharmaceuticals, is determined to see the 278-kilometre, $50 billion project for which his Cayman Island-based company won a 50-year concessions contract through to completion. 

Late last month paperwork was filed to that effect. 

In the 11th hour on May 31, HKND filed its Environmental and Social Impact Statement (ESIA) with the Nicaraguan government, and chief project advisor Bill Wild believes the company should receive a preliminary response to the submission in about a month. If the ESIA is approved, it would clear the way for issuance of environmental permits, and Wild said HKND could and would begin real construction work on the project before the year is through. 

As Wild outlined in an exclusive interview with Infrastructure Investor, the overall project is broken up into a handful of sub-projects which include development of ports at the eastern and western mouths of the canal, construction of a cable-stayed bridge to connect the northern and southern sections of the Pan-American Highway, airports, tourist facilities, a free-trade zone, power transmission towers and lines, and permanent public roads as well as private maintenance routes.

The project continues to face strong opposition from local and international interest groups. But as Wild told a large crowd of developers, investors and regional government officials at the 13th annual CG-LA Latin America Forum in Antigua, Guatemala, in mid-June – where HKND was awarded as CG-LA's top strategic infrastructure project in Latin America and as the biggest infrastructure-related jobs creator in the region – the project currently has support of roughly 63 percent of the roughly 6 million Nicaraguan residents, according to surveys conducted by M&R Consultores and published in the Sistema de Monitoreo de Opinion Publica (SISMO) in March this year, 

Those studies also show that almost 60 percent of the Nicaraguan people believe the canal will provide benefits to the landowners directly along the canal route, and that the project will provide an opportunity to restore Lake Nicaragua.

This growing support is coupled with the belief of national politicians, including President Jose Daniel Ortega Saavedra, that the project will help pull the Central American nation out of poverty and provide as many as 250,000 sustained jobs.

Still, with estimates that as many as 100,000 residents will be displaced (the Nicaraguan government places this number closer to 27,000 and Wild has previously told HuffPost that only 300 families would face displacement), violent protests continue to plague the nation, with one march earlier this month in Juigalpa attracting an estimated 10,000 demonstrators.

To assuage these residents, Wild said that HKND is currently conducting real asset price assessments and plans to offer fair compensation for affected land – even going so far as to develop new villages for the residents with modern social infrastructure to which they currently do not have access, including power, sewage, roads, education and medical facilities. 

Further, in our interview, he said that the development plan is extremely conscious of the environmental sensitivity of the region, and will in many ways positively affect local ecology.  

In total, according to project documents published in December 2014, the project will require the import of 21 million tons of materials and supplies – including 400,000 tons of explosives for excavation of 5,000 cubic megametres of earthwork (enough to fill 2 million Olympic-size swimming pools, though there are more productive plans in place for using the reclaimed soil such as use in step farms and pastures, Wild told us), much of which lies in areas with heavy annual rainfall.

It is estimated that roughly 50,000 workers will be hired during the five-year construction period, about half of which will be Nicaraguan, 25 percent of which will be Chinese, and the remainder of which will be sourced globally, according to the documents. 

“The [canal] is a massive project. There's no doubt about that. Massive projects are not that easy. They're difficult to get going. But there's nothing on this project that is a challenge from a technical point of view, or that in engineering will break new frontier. Everything on this project has been done before,” Wild said. 

“Everything on this project's bigger, and the weather conditions are difficult; the seismic conditions are more difficult on the west than many areas; there are the hydrologic issues of Lake Nicaragua: All of those are sort of more so on this job than any job I can think of. But they're not different. They're not beyond the realms of our engineering capability. They're not beyond what we can commit to doing.” 

While from an engineering perspective, the challenges ahead may be less than groundbreaking, there is still much uncertainty surrounding how the canal will be financed. Some independent estimates place the real cost of the project closer to $100 billion. Jing announced in June 2013 that he had successfully attracted global investors to support the project, but evidence of that support has yet to come to light.

This lack of transparency has led to speculations that the Chinese government is behind the project – with US-based Foreign Policy magazine even going so far as to note that the depth of the canal would allow Chinese submarines to pass through the canal undetected – but the Chinese government and Jing have separately denied their involvement in previous media addresses.