Geopolitics

A Dubious Chinese Link To The Grand Nicaragua Canal

Groundbreaking on the much heralded Central American project is said to be imminent. But huge doubts linger, including the bankrolling of the project by a mysterious Chinese businessman.

Protester accusing Managua of selling out Nicaragua's interests.
Roberto Giovannini

MANAGUA — If it actually gets built, the Interoceanic Grand Canal — which would stretch for 278 kilometers between Venado on Nicaragua's Atlantic coast to Puerto Brito on the country's Pacific side — would be the most impressive work of infrastructure in the world.

This gigantic ship canal would be larger than Panama's — 30 meters deep, ranging from 230 to 520 meters wide, and splitting Nicaragua in two. It would pass mountains and go through rivers, and use the great Cocibolca Lake, the largest body of fresh water in Central America, to shorten its course.

The government here claims the Nicaragua Canal will be completed by 2020 at an estimated cost of around $50 billion, four times the size of the entire Nicaraguan economy — and some observers say that pricetag is grossly underestimated. It would create at least 50,000 jobs for construction and 200,000 more upon completion.

Construction is said to begin Dec. 25.

"This project will bring well-being, prosperity and happiness to the people of Nicaragua," says President Daniel Ortega, who pushed through parliament a package of legislation for the canal last year. This decision came without public consultation, without environmental or feasibility studies, without parliamentary debate — and without even a fully defined route.

Instead, a company owned by a mysterious Chinese businessman named Wang Jing was given carte blanche to develop the canal at his cost. The Hong Kong Nicaragua Canal Development (HKND), registered in the Cayman Islands, has been given the concession rights for 100 years. The company has the go-ahead to expropriate all necessary land and, in order to profit, implement two ocean ports with oil terminals at each end of the channel, a trade zone free from taxation where a city, international airport and plethora of tourist resorts would conceivably be built.

Both experts and insiders are questioning whether a megaproject like this is really necessary, because the Panama Canal is fully operational and has even recently been expanded and improved.

Proposed routes of Nicaragua Canal in red. Wikipedia

But according to Keith Svendsen, chief of operations at Danish shipping company Maersk, there is a market for the Nicaragua Canal. "It could accommodate larger container ships than Panama can," he says. "And it would save about 800 kilometers on journeys."

Some estimates say that the new channel would welcome 5% of worldwide commercial maritime traffic, though others, including Hofstra University's Jean-Paul Rodrigue, argue that the canal would never be profitable.

But even before that question, many simply doubt that it will ever actually be built.

Not very earth friendly

Further concerns include ecology and the environment. Scientists Axel Meyer and Jorge Huete-Pérez say the project would pose an "imminent environmental disaster." Around 400,000 hectares (988 acres) of tropical forest and swamps are threatened, and the project would pass near protected areas — not to mention that some river flow would have to be reversed. Above all, it would jeopardize Lake Cocibolca where many rare species live.

The canal would discharge salty ocean water into the lake, Meyer and Huete-Pérez say, and it would have to be dredged and deepened to allow the passage of 5,100 gigantic ships a year. There is a high risk of accidents and pollution too.

Finally, many wonder about the real role of Wang Jing and whether he is actually the long arm of the Chinese government. A 41-year-old lawyer, Wang leads a telecommunications company and has no experience in engineering or infrastructure.

Wang Jing

In interviews, he has always denied any government involvement, but for preparatory work his development company is using the Changjiang Institute of China Railroad Construction Corp. — the state-owned engineering giant that worked on the Yangtze River's mega dam.

In Nicaragua, the canal project has raised significant controversy and protests, exacerbated by the highly generous concessions Wang has been offered, which Ortega's opposition claims could hide any traces of enriching the president's family.

"This is a totally shady project," says Carlos Chamorro, son of former President Violeta Chamorro and editor of daily El Confidencial. "We don't know anything about the economic feasibility, environmental dangers or the social ones, as well as those on the country's sovereignty. We call for transparency, for full information on the project and monitoring by independent experts from abroad."

The Brito coast could be the canal's Pacific entry point. Photo: Dilly Lama

Other opponents include three great Nicaraguan writers: Ernesto Cardenal, Sergio Ramirez and Gioconda Belli. All three personalities were at one time close to Ortega's party, but have for some time now been on a collision course with his government.

In recent days, protests have multiplied, especially among those living in the areas affected by the canal's development. The Chinese technicians increasingly are a presence, and are accompanied by government personnel, engaged in geological and engineering studies.

The government, of course, stays busy assuring that everything is in order. "In the next few days, all studies will be released on the social and environmental impacts of the project," says Francisco Telémaco Talavera, outgoing leader of Nicaragua's National Agrarian University and one of the strongest supporters of the canal. "In the end, it will be a positive outcome for the country. We will become a regional economic power and will grow by 14% per year."

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Economy

European Debt? The First Question For Merkel's Successor

Across southern Europe, all eyes are on the German elections, as they hope a change of government might bring about reforms to the EU Stability Pact.

Angela Merkel at a campaign event of CDU party, Stralsund, Sep 2021

Tobias Kaiser, Virginia Kirst, Martina Meister


-Analysis-

BERLIN — Finance Minister Olaf Scholz (SPD) is the front-runner, according to recent polls, to become Germany's next chancellor. Little wonder then that he's attracting attention not just within the country, but from neighbors across Europe who are watching and listening to his every word.

That was certainly the case this past weekend in Brdo, Slovenia, where the minister met with his European counterparts. And of particular interest for those in attendance is where Scholz stands on the issue of debt-rule reform for the eurozone, a subject that is expected to be hotly debated among EU members in the coming months.

France, which holds its own elections early next year, has already made its position clear. "When it comes to the Stability and Growth Pact, we need new rules," said Bruno Le Maire, France's minister of the economy and finance, at the meeting in Slovenia. "We need simpler rules that take the economic reality into account. That is what France will be arguing for in the coming weeks."

The economic reality for eurozone countries is an average national debt of 100% of GDP. Only Luxemburg is currently meeting the two central requirements of the Maastricht Treaty: That national debt must be less than 60% of GDP and the deficit should be no more than 3%. For the moment, these rules have been set aside due to the coronavirus crisis, but next year national leaders must decide how to go forward and whether the rules should be reinstated in 2023.

Europe's north-south divide lives on

The debate looks set to be intense. Fiscally conservative countries, above all Austria and the Netherlands, are against relaxing the rules as they recently made very clear in a joint position paper on the subject. In contrast, southern European countries that are dealing with high levels of national debt believe that now is the moment to relax the rules.

Those governments are calling for countries to be given more freedom over their levels of national debt so that the economy, which is recovering remarkably quickly thanks to coronavirus spending and the European Central Bank's relaxation of its fiscal policy, can continue to grow.

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive.

The rules must be "adapted to fit the new reality," said Spanish Finance Minister Nadia Calviño in Brdo. She says the eurozone needs "new rules that work." Her Belgian counterpart agreed. The national debts in both countries currently stand at over 100% of GDP. The same is true of France, Italy, Portugal, Greece and Cyprus.

Officials there will be keeping a close eye on the German elections — and the subsequent coalition negotiations. Along with France, Germany still sets the tone in the EU, and Berlin's stance on the brewing conflict will depend largely on what the coalition government looks like.

A key question is which party Germany's next finance minister comes from. In their election campaign, the Greens have called for the debt rules to be revised so that in the future they support rather than hinder public investment. The FDP, however, wants to reinstate the Maastricht Treaty rules exactly as they were and ensure they are more strictly enforced than before.

This demand is unlikely to gain traction at the EU level because too many countries would still be breaking the rules for years to come. There is already a consensus that they should be reformed; what is still at stake is how far these reforms should go.

Mario Draghi on stage in Bologna

Prime Minister Mario Draghi at an event in Bologna, Italy — Photo: Brancolini/ROPI/ZUMA

Time for Draghi to step up?

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive. That having been said, starting in January, France will take over the presidency of the EU Council for a period that will coincide with its presidential election campaign. And it's likely that Macron's main rival, right-wing populist Marine Le Pen, will put the reforms front and center, especially since she has long argued against Germany and in favor of more freedom.

Rome is putting its faith in the negotiating skills of Prime Minister Mario Draghi, a former head of the European Central Bank. Draghi is a respected EU finance expert at the debating table and can be of great service to Italy precisely at a moment when Merkel's departure may see Germany represented by a politician with less experience at these kinds of drawn-out summits, where discussions go on long into the night.

The Stability and Growth pact may survive unscathed.

Regardless of how heated the debates turn out to be, the Stability and Growth Pact may well survive the conflict unscathed, as its symbolic value may make revising the agreement itself practically impossible. Instead, the aim will be to rewrite the rules that govern how the Pact should be interpreted: regulations, in other words, about how the deficit and national debt should be calculated.

One possible change would be to allow future borrowing for environmental investments to be discounted. France is not alone in calling for that. European Commissioner for Economy Paolo Gentiloni has also added his voice.

The European Commission is assuming that the debate may drag on for some time. The rules — set aside during the pandemic — are supposed to come into force again at the start of 2023.

The Commission is already preparing for the possibility that they could be reactivated without any reforms. They are investigating how the flexibility that has already been built into the debt laws could be used to ensure that a large swathe of eurozone countries don't automatically find themselves contravening them, representatives explained.

The Commission will present its recommendations for reforms, which will serve as a basis for the countries' negotiations, in December. By that point, the results of the German elections will be known, as well as possibly the coalition negotiations. And we might have a clearer idea of how intense the fight over Europe's debt rules could become — and whether the hopes of the southern countries could become reality.

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