Chinese tycoon plans to rival Panama Canal with $40 billion waterway through Nicaragua

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In recent months, China has launched its fourth manned space expedition, dispatched its first aircraft carrier to sea for training exercises and even announced plans to build a “Titanic II” ocean liner on the same blueprint as the ill-fated original.

But the plans moving ahead by a shadowy Beijing businessman may be the most ambitious — and improbable — of all to emerge from the world’s newest economic superpower: a privately funded, 130-mile, $40 billion waterway through the rivers and dense tropical forests of Nicaragua designed to challenge the 100-year-old shipping monopoly of the Panama Canal.

The government of Nicaraguan President Daniel Ortega is onboard, and Wang Jing, the billionaire chairman of HK Nicaragua Canal Development Investment Co. (HKND), whom Chinese media describe as a “Beijing-based serial entrepreneur,” dismisses the doubters, both in Nicaragua and the United States.

“We don’t want it to become an international joke, and we don’t want it to turn into an example of Chinese investment failure,” Mr. Wang, 40, said at a Beijing news conference late last month, shortly after the Nicaraguan parliament officially approved the project. “People are not seeing what we are doing.”

The Hong Kong-based development group reached an exclusive 50-year agreement in June with the Nicaraguan government to design, construct and operate the canal to handle global trading and shipping, along with other potential infrastructure projects including an oil pipeline, two ports, a railroad and two airports. If and when the project is completed, it would rank as the world’s largest civil engineering project, roughly three times as long as its Panamanian rival.

The Panama precedent

Backers note that the Panama Canal faced its own logistical, financial and engineering challenges before opening for shippers seeking a quick route linking the Atlantic and Pacific oceans in August 1914.

The canal, begun by the French, completed by the United States and, since 1999, operated by the government of Panama, is finishing a $5.15 billion expansion to construct two additional sets of locks, which will double its capacity and allow more and wider ships to pass. (In one sign of Beijing’s growing economic clout, a Hong Kong-based company has the contract to operate the port facilities at both ends of the canal.)

Although the Panama Canal could handle the largest ocean traffic when it was first built, subsequent models have been barely fitting. “Supermax” cargo ships can’t fit at all and are forced to go around the tip of South America instead. The additional locks will help alleviate this problem.

Supporters of the Nicaragua canal, however, say that even an expanded Panama Canal cannot accommodate the expected increase of global trade or the biggest supertankers and military vessels, bolstering the economic argument for a rival canal. The Nicaragua canal is expected to be large enough to accommodate these ships.

In a statement emailed to The Washington Times, the Panama Canal Authority did not sound like an entity fearful of a competitor stalking its customers.

“Today, Panama has highly efficient port terminals in the Pacific and the Atlantic oceans, as well as an interoceanic railroad and two strategically located free-trade zones,” the authority said. “The region’s most important air transportation hub is rapidly integrating this logistic hub.”

Rodolfo Sabonge, vice president of market research at the authority, told the Reuters news agency last month that it was hard to judge the Nicaragua project.

“Until we really see the plans and understand the investment, all we know is that they talk about $40 billion,” he said. “It’s very, very early.”

U.S. skeptics of the idea are not hard to find. They note that the Chinese firm has not settled on a route for the canal, that the Nicaragua route would run through Lake Nicaragua, Central America’s largest lake and a prime source of the country’s drinking water, and that the length of the canal may make it uncompetitive with the shorter Panama alternative.

“Who’s going to invest when they don’t even know where the canal is going to be built?” said Bob McMillan, former chairman of the Panama Canal Commission, referring to HKND’s lack of a set route across Nicaragua. “The [various proposed] paths all go through Lake Nicaragua, which is the source of fresh drinking water for most of Nicaragua. What if there is a damaged ship that leaks petroleum or some other kind of chemical into the lake? That would be a disaster for the drinking water.”

Mr. McMillan also cited concerns about whether the cash-strapped Nicaraguan government would be ready to manage the canal.

“Panamanians were totally ready to take over the Panama Canal’s management when the transfer took place in 1999,” he said. “[Will Nicaragua be] as ready or would more Chinese have to come to the country to ensure an effective operation of the canal — if the canal is actually built?”

According to the company’s projections, the canal would create some 40,000 construction jobs and virtually double Nicaragua’s per-capita gross domestic product.

Old idea

The idea of building a canal across Nicaragua has a long pedigree, attracting interest from the likes of Henry Clay, Cornelius Vanderbilt and French Emperor Louis Napoleon. The Theodore Roosevelt administration considered a Nicaragua route before political events opened the shorter Panamanian option at the dawn of the 20th century.

China, as the latest emerging global force, is repeating the pattern even as it builds economic relationships across Latin America.

“We’re coming back full circle to where we were 165 years ago. It’s not particularly surprising,” said Cynthia Watson, a professor of national security at the National War College. “Another canal would certainly bring to fruition what has been kind of a low-level but persistent voice that Beijing has had over the last about 15 years, that they would like to have greater access to the Atlantic and be able to find an alternate route, beyond Panama, where they wouldn’t feel that the U.S. could potentially impact on their access to either end of that canal.”

Ms. Watson warned to not assume that the canal is “absolutely going to happen,” citing technical problems of building a canal, including the engineering challenge posed by Nicaragua’s frequent earthquakes.

The enigmatic Mr. Wang faces additional skepticism based on his ambiguous background. The 40-year-old businessman built a fortune on telecommunications and is chairman of more than 20 enterprises around the world, but has no experience with large infrastructure projects. The Nicaragua canal is HKND’s first such project.

Despite Mr. Wang’s insistence that he has no connection to the Chinese government, the South China Morning Post reported last week that the technical feasibility study of the Nicaragua canal is being carried out by one of China’s largest state-owned companies, China Railway Construction Corp.

Mr. Ortega faces opposition at home to the Chinese canal proposal, from environmental groups and from political rivals who question the credentials of Mr. Wang.

If more information about the lead investor isn’t forthcoming, “we can assume this is a swindle, a deal with a front company to get a concession, and then sell the rights to someone else,” officials of the opposition Sandinista Renovation Movement said in a recent policy statement, according to The Associated Press. “It’s a corrupt deal to make a lot of money with fake investors.”

Supporters of the canal say the project will provide massive economic benefits to the impoverished country without any expense on the part of Nicaragua.

Construction of the canal is set to begin by the end of 2014 and be completed by 2019, Mr. Wang said.

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