Politics, Business & Culture in the Americas

Nicaragua’s Chinese Canal Plans: Fulfillment of a Dream, or Prelude to a Nightmare?

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Amid loud protest that President Daniel Ortega is “privatizing Nicaragua’s dream,” handing over the country to a Chinese businessman and indulging in the same type of “savage capitalism” that he has railed against during his entire political career, Nicaragua’s Sandinista government this week used its supermajority muscle in the legislative National Assembly to give a generous 50-year concession to an unknown Chinese company to design, build and operate an inter-oceanic canal to rival Panama. Ortega is scheduled to sign the bill into law tonight during a nationally televised event.

The Great Nicaragua Canal megaproject, with carries an estimated price tag of $40 billion, includes a combo of megaprojects: two deep-water ports, two international airports, a transisthmian oil pipeline, and an inter-oceanic freight railroad. “This will be one of the world’s most significant infrastructure projects ever,” claims the Chinese concessionaire, HKND Group, a company that was registered only a few months ago in the Cayman Islands. HKND is owned by enigmatic Chinese telecom tycoon Wang Jing, and has no ties to the Chinese government. Nor does Nicaragua, which instead maintains diplomatic ties with Taiwan.

“This is a totally privately held company …there is no government involvement whatsoever, not from China or any other country,” HKND Group spokesman Ronald MacLean-Abaroa, a former Bolivian politico and World Bank official, told me in an interview today. “The minute you have government involved in these kind of projects, the private investors fly away.”

If $40 billion sounds like a lot of money to invest in Nicaragua, that’s because it is. To date, the largest private investment projects in Nicaragua barely measure in the hundreds of millions. So $40 billion—a number that is four times larger than the country’s entire GDP—would seem to have too many zeros to even fit in such small economy.Indeed, so far no one other than Wang—a man of undetermined wealth—has come forward to underwrite the project. President Ortega’s role as a businessman is unclear. “What I can tell you is that 100 percent of this project is owned by Mr. Wang, and there is no other interest at this point from other private investors,” MacLean-Abaroa says. The company spokesman says Wang is footing the entire bill himself, and plans to take the project to market to find other private investors once the feasibility studies are done in a year or two.

Until then, the fate of Nicaragua’s privately funded and operated Chinese canal project is anyone’s guess.  Virtually all details about the project are pending. There is no defined route (Nicaragua has been considering six alternative routes for decades), no feasibility studies, no environmental-impact studies, no investors, and no clear timeframe. All that is known, based on the concession law rammed through congress by Sandinista lawmakers, is that the canal will be privately owned and operated, with a gradual transfer of ownership to the state, which would assume 51percent of the project by the end of the 50-year concession.

But for now, there’s far more questions than answers. And that uncertainty has many Nicaraguans feeling bitterly suspicious about the true nature of their president’s cozy and curious relationship with an unknown Chinese businessman, who—by way of a Sandinista sweetener—was recently awarded a $300 million cellphone service contract in Nicaragua and is also involved in deal to sell the Sandinistas a $244 million Chinese satellite that will be launched in 2015. 

“This is the birth of the second William Walker, named Wang Jing,” says opposition congressman Javier Vallejos, comparing the Chinese businessman to the former U.S. adventurer who invaded Nicaragua with a private army of filibusters and declared himself president in nineteenth century.

While the Sandinista government claims the canal project will eradicate poverty and usher in a new era of prosperity for the region’s habitual economic basket case, Nicaragua’s opposition has the unsettling feeling that their country’s centuries-old dream of having a transatlantic canal could turn into a nightmare.

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