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China to build Nicaragua Canal, another Pacific-Atlantic connection


Nicaragua’s President Daniel Ortega (L) and Wang Jing, chairman of the Hong Kong international company Nicaragua Canal Development Investment Co.

Nicaragua’s President Daniel Ortega (L) and Wang Jing, chairman of the Hong Kong international company Nicaragua Canal Development Investment Co.

For centuries since the colonisation of the New World, entrepreneurs have dreamed of building a canal spanning Nicaragua to make it easier to tap Asia’s riches.

Sixteenth century Spanish conquistador Hernan Cortes yearned to cleave the isthmus, and ever since, French, American and Dutch financiers have all made abortive, Quixotic attempts to bisect the Central American country’s volcano-studded terrain.

Now it’s the turn of the Chinese. And scepticism is as strong as ever.

The Hong Kong-based company that won a concession to design, build and manage a $40 billion canal to rival Panama’s says it has been lured by an energy renaissance in the United States and its belief that world trade could double by 2030.

The company, HKND Group, was registered last year in the Cayman Islands. This would be its first infrastructure project, and its 40-year-old boss, Wang Jing, is relatively unknown.

There is still no firm route for the proposed canal, which would cost about four years’ worth of Nicaragua’s annual gross domestic product, and would likely be three times longer than the 48-mile (77-km) Panama Canal, which took a decade to build. Engineers also note that the geography poses some major challenges – not least a 20 foot tide differential between the two coasts.

For all those reasons, investors and infrastructure experts are highly dubious that a canal will ever be built.

“Are international shipping companies going to trust a one-guy shop with minor telecommunications experience to be the system integrator on a $40 billion project in a country whose transparency is already subject to question?”, said Evan Ellis, a professor of national security studies at the U.S. Government’s National Defence University.

Greg Miller, a shipping consultant at IHS Fairplay, a global maritime intelligence company, was also highly sceptical.

“The Nicaragua canal will never be built and the only people who’ll financially profit from this proposal are the consultants paid to do the feasibility studies,” he said.

Rosario Murillo, the wife of President Daniel Ortega and his government spokeswoman, said at a ceremony with Wang after the concession was granted: “This is a day of miracles, of wonders.” Government officials declined to comment on scepticism that has emerged since then.

BETTING ON ENERGY BOOM

HKND Group is a unit of holding company the HK Nicaragua Canal Development Investment Co., Ltd. which was incorporated last year, according to the Hong Kong Companies Registry.

It bases its projections for the future success of a Nicaragua canal on the U.S. shale revolution, which has unlocked decades of oil and gas supply. If the United States wants to export more to Asia, the theory goes, it will need to send more and bigger ships from Gulf Coast refineries by canal to the Pacific, and Panama won’t be able to handle it all.

“This project can be undertaken now, and only now, thanks to the discovery of prodigious amounts of gas and oil in the United States,” said Ronald MacLean-Abaroa, HKND Group’s spokesman, who is a former mayor of Bolivia’s La Paz and one-time World Bank governance specialist.

“Three years ago that didn’t exist,” he told Reuters in an interview, saying the company would seek to raise private financing in Asia. On its website, the company also pointed to growth in U.S. exports of iron ore, coal and grains.

The Panama canal is already expanding to accommodate growth in traffic, and experts say the shale oil boom could benefit a Nicaraguan project, if it is ever completed.

Maersk Line, the world’s largest container shipping company and the Panama Canal’s top customer, has rerouted services from Asia to the East Coast of the United States via the Suez Canal. Its newest ships are too big for the Panama Canal, even after a third lane is built.

A spokesman for Maersk Line Central America and Caribbean said it was too early to speculate on the Nicaragua project, but it would be monitoring developments.

“We applaud bold initiatives that can boost the possibilities for container shipping for the benefit of both lines and our customers,” Ariel Frias said.

Panama Canal officials have said it is too early to speculate on the viability of the Nicaraguan waterway or how it could affect trade.

OUT OF THE BLUE

Little is known about the Chinese lawyer and businessman behind the canal project, Wang Jing.

According to his identity card data, Wang was born in Beijing on December 24, 1972, but there is no information on him publicly available until 2010, when he became the head of the Xinwei Telecom Enterprise Group, a wireless communications company. Wang visited Nicaragua in 2012 and signed a wireless telecoms deal.

Xinwei’s website says the group’s core markets include public telecoms operations, public security, oil fields, power grids, water conservancy and transportation and emergency communication, and lists several subsidiaries in China, Hong Kong, Russia and Cyprus.

The site, which does not mention HKND Group, carries photographs of Xi Jinping, now China’s president, and Li Keqiang, now premier, visiting Xinwei.

“Your future is very bright. Full of hope,” the site quotes Li as saying of Xinwei, picturing Wang with the leader. It said the visit took place on December 21, 2010.

At Wang Jing’s listed office in Hong Kong, a woman declined to say where he was. HKND Group’s plush office takes up a large part of the 18th floor of Two International Finance Centre, which it occupied in May.

The office is large and brand new with a view of Victoria Harbor outside its floor-to-ceiling windows. Big LED screens by the front door play the company’s promotional videos in a loop. The office was very quiet and few people were working there.

An HKND spokesperson contacted by email said Wang was not available to comment for this story.

The company has given little information on the practicalities of building the proposed canal. The concession simply lists a shipping canal, ports and terminals, an oil pipeline, a railway, free trade zones and an airport.

Unlike the Panama Canal, a canal cutting across Nicaragua could theoretically be built at sea level, without locks, but there is a problem with the tides at either end. The timing and height of the tides are different, meaning that the water level can be as much as 20 feet higher at one end.

“It means a lot of water is going to come from west to east,” said J. David Rogers, professor or geological engineering at Missouri University of Science & Technology.

“Everybody would love to have a sea-level canal between the Pacific and the Atlantic,” he said, adding that engineers would likely have to consider tidal weirs.

“I’m not saying you can’t do it, but it has some major engineering challenges that have to be overcome, and if it’s your first project, I wouldn’t invest in it.”

Environmentalists are concerned the project could contaminate Lake Nicaragua, Central America‘s largest reserve of fresh water, which would almost certainly be part of any route.

President Ortega said last week the government was going ahead with feasibility studies that should be done by 2015, when work on the canal could begin.

Under the terms of the concession, HKND Group would face no legal or economic sanctions for failing to complete the project.

“Who knows if this is actually going to happen or not, but it seems much more serious at this point. There’s some real heavy-weights involved,” said Margaret Myers, director of the China and Latin America program at the Washington D.C.-based Inter-American Dialogue.

She noted HKND Group says it is working with several respected international companies, including Environmental Resources Management, a leading sustainability consultancy, and consulting firm McKinsey & Company.

McKinsey declined to comment, citing client confidentiality. Environmental Resources Management confirmed it had been hired to do a study.

SHOW ME THE MONEY

Another open question is the financing.

Christopher Erckert is a partner at the U.S. Mayer Brown law firm, which advised the Panama Canal Authority in its $5.25 billion expansion. A specialist in Latin American project finance, he said the main risk would be if Nicaragua nationalised the canal in the future.

“Nicaragua is not an investment grade country. That’s a fact,” he said. “That makes this a speculative grade investment… which limits the kind of investors who can play.”

Several project financiers Reuters spoke to, who asked not to be named, said they had seen no signs in the industry of interest in the project.

If the project does go ahead, it might depend on China’s desire to flex its muscles in America’s backyard.

Alfonso Guzman, managing director at Castalia Strategic Advisors, an international economic and financial advisory firm, said it was hard to see how the project would be commercially viable.

“The only way it can be viable is if someone like the Chinese government provides a lot of grants and low-cost money so that the cost of the project is low and the prices charged for using this canal are lower or comparable to what the Panama canal offers,” he said.

(With reporting by Lomi Kriel in Panama City, Isabella Cota in San Jose; Krista Hughes, Gabriel Stargardter and Simon Gardner and Elinor Comlay in Mexico City, Jonathan Standing and Koh Guiqing in Beijing, Lavinia Mo, Anne Marie Roantree and James Pomfret in Hong Kong and Kristen Hays in Houston; Writing by Gabriel Stargardter and Simon Gardner; Editing by Claudia Parsons)
 
Source: Reuters – Insight: Who wants to bet on a ‘Nicaragua Canal’?
 

About chankaiyee2

Author of the book "Tiananmen's Tremendous Achievements" about how with the help of Tiananmen Protests, talented scholars with moral integrity seized power in the Party and state and brought prosperity to China. The second edition of the book will be published within a few days to mark the 25th anniversary of Tiananmen Protests All the parts in the first edition remain in the second edition with a few changes due to information available later and better understanding. There are also some changes for improvements of style. The new parts are Chapters 12-19 on events in China after the first edition was published: The fierce power struggle for succession between reformists and conservatives; Xi Jinping winning all elders’ support during his mysterious disappearance for 2 weeks in early September, 2012; and Xi Jinping Cyclone. Chan Kai Yee's new book: SPACE ERA STRATEGY: The Way China Beats The US An eye-opening book that tells the truth how the US is losing to China. The US is losing as it adopts the outdated strategy of Air-Sea Battle while China adopts the space era strategy to pursue integrated space and air capabilities: It is losing due to its diplomacy that has given rise to Russian-Chinese alliance. US outdated strategy has enabled China to catch up and surpass the US in key weapons: Hypersonic weapons (HGV) that Pentagon regards as the weapon that will dominate the world in the future. Aerospaceplane in China’s development of space-air bomber that can engage enemy anywhere in the world within an hour and destroy an entire aircraft carrier battle group within minutes. Anti-satellite (ASAT) weapons, anti-ASAT weapons, stealth aircrafts, drones, AEW&C, etc. The book gives detailed descriptions of China’s weapon development based on information mainly from Chinese sources that the author monitors closely. U.S. Must Not Be Beaten by China! China is not a democracy. Its political system cannot prevent the emergence of a despotic leader or stop such a leader when he begins to bring disasters to people. A few decades ago, Mao Zedong, the worst tyrant in world history did emerge and bring disasters to Chinese people. He wanted to fight a nuclear war to replace capitalism with communism but could not bring nuclear holocaust to world people as China was too weak and poor at that time. If a despot like Mao Zedong emerges when China has surpassed the US in military strength, world people will suffer the misery experienced by Chinese people in Mao era. China surpassing the US in GDP is not something to worry about as China has the heavy burden to satisfy its huge population, but China surpassing the US in military strength will be world people’s greatest concern if China remains an autocracy. US people are of much better quality than Chinese people. What they lack is a wise leader to adopt the correct strategy and diplomacy and the creative ways to use its resources in developing its military capabilities. I hope that with the emergence of a great leader, the US can put an end to its decline and remain number one in the world. China, US, space era strategy, air-sea battle, space-air bomber, arms race, weapon development, chan kai yee

Discussion

4 thoughts on “China to build Nicaragua Canal, another Pacific-Atlantic connection

  1. Kra canal is better way to develop shipping industry in asian reagion.

    Like

    Posted by Sanura weeraratne | November 27, 2016, 10:03 am

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