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Is Nicaragua canal bid an attempt to deflect from country’s poverty?

June 22, 2012

From the print edition

MANAGUA – Nicaragua plans to carve out a $30 billion alternative to the Panama Canal, in what analysts say is a large, financially untenable project, aimed primarily at detracting from crushing poverty.

The proposed Nicaragua Canal “represents the summit of Nicaragua’s historic aspiration of profiting from its geography” to create the continent’s second inter-oceanic shipping route, said presidential adviser Jaime Incer.

The canal was first conceptualized in the early 1800s, but was stalemated by U.S. investors’ concerns about poverty and political instability.

Now, international investors from Japan, China, Russia, Venezuela, Brazil and South Korea have expressed interest in contributing funds, project director Edén Pastora told local television reporters.

The canal would take 10 years to build and would cover more than 200 kilometers across six possible routes, according to a congressional draft bill submitted by President Daniel Ortega’s administration earlier this month.

The shipping route is expected to breathe life into a floundering economy, and the Nicaraguan government plans to conserve 51 percent of shares and tenders in the joint venture.

Since the United States returned the Panama Canal in 1999, the waterway has brought well over $6 billion into that country.

In the 2010-2011 fiscal year alone, the canal raked in $1 billion for Panama. Some 5 percent of international commerce moves through the Panama Canal, which covers a total of 80 kilometers.

A behemoth project like the Nicaragua Canal is an “illusion” that policymakers may hope will deflect from poverty, said analyst Carlos Tuennerann.

In Nicaragua, the second poorest country in the Americas after Haiti, it is estimated that half of the total 5.8 million inhabitants live below the poverty line.

Project analysts remain doubtful it will survive short-term considerations, largely because of the international economic crisis and Nicaragua’s own political instability.

“It will be difficult to see this project come to fruition in the next few years. Europe is in a recession, Japan too. China has slowed its growth, and Russia [considered by Nicaragua to be the biggest investor in the project] is economically depressed,” former lawmaker José Pallais told AFP.

Still, if the project is completed, it would “improve the economic conditions of the country,” Pallais added.

Ideally, Nicaragua’s conduit would be “larger and deeper” than the Panama Canal, currently the only man-made shortcut between the Atlantic and Pacific, said project director Pastora.

Local authorities have argued the Panama Canal, inaugurated in 1914, is currently “insufficient” to address global demand.

But the Panama Canal is currently undergoing a $5.25 billion enlargement project and remains unfazed by Nicaraguan competition.

“We aren’t too worried. Our competitiveness is good. … Infrastructural projects in the region are a good thing,” said Panama Canal’s administrator, Alberto Alemán.

Territorial disputes between Nicaragua and its perennial adversary to the south, Costa Rica, may represent another barrier in the ambitious canal project.

In late 2010, Nicaragua sparked a diplomatic row with Costa Rica when it began dredging the San Juan River, which divides the two nations, leading Costa Rica to accuse it of invading a small island in the river. 

Costa Rica last week demanded an explanation over the plans, with the Foreign Ministry saying Nicaragua was free to develop infrastructure projects on its own territory, adhering to relevant border treaties.

Nicaragua is pushing on with its efforts. Last week, a government delegation traveled to Brussels to present the project to an international conference on trans-oceanic canals.

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