Nicaragua canal to break ground amid anger, skepticism

Workers were set to break ground Monday for the construction of Nicaragua's controversial $50 billion canal linking the Pacific Ocean and the Caribbean Sea. The mega-project — widely reported as the world’s largest civil engineering enterprise — has been shrouded in secrecy and has outraged farmers, indigenous communities and citizens around the country. Vice President Moisés Omar Halleslevens and Chinese firm HKND Group inaugurated the canal in a ceremony in the southwestern municipality of Rivas, Nicaraguan media reported.

The canal, scheduled for completion in December 2019, will cut across the middle of the country and bisect Lake Nicaragua, known locally as Lake Colcibolca — the second-largest lake in Latin America and the largest drinking-water reservoir in the region. The canal will also cut through the Cerro Silva Nature Reserve.

Projected to span 173 miles, the canal would be the realization of a dream that has been studied and discarded multiple times since the early 1800s. Backers say it will lift many out of poverty in Nicaragua, the second-poorest country in the Western Hemisphere after Haiti.

Earlier this month, residents of Obrajuelo, a sleepy fishing village on the banks of Lake Nicaragua, threw stones at an SUV carrying a Chinese team that showed up to survey the land. The following day, the residents burned tires on the Pan-American Highway, blocking it for hours. On Dec. 10, as many as 5,000 people marched through the capital, Managua. Even though protesters complained that police blocked canal opponents trying to arrive from the countryside, observers said it was the largest anti-government action in years.

Such political opposition is virtually unheard of in a country where President Daniel Ortega's Sandinista party dominates all branches of government. The president and his wife, the government's powerful communications chief, keep a tight lid on dissent.

"What it shows is that a significant part of the Nicaraguan people have not bought into the canal project," said Francisco Aguirre-Sacasa, an economist, former Nicaraguan foreign minister and ex-ambassador to the United States. "A demonstration of that size, despite the impediments that were put in the way of it, shows that the government is playing with fire in this case."

The Nicaragua canal is the latest and largest example of China’s growing influence in Latin America. The project is set to be developed and operated by HKND, a Chinese infrastructure development firm registered in Hong Kong. CEO and chairman Wang Jing is a successful but virtually unknown telecoms executive with no experience in large-scale civil engineering projects like building a canal.

Despite this, Ortega's allies in Congress fast-tracked legislation last year granting HKND a 50-year concession, renewable for another 50, to build and operate the canal in return for a payment of $10 million a year once it's up and running.

As a note of comparison, Panama — Nicaragua’s economically larger and more stable southern neighbor — held a national referendum to approve its $5.25 billion canal expansion.

In addition to the canal, Nicaragua will allow HKND to develop ancillary projects including two ports, an airport, roads, a railway and a tourist resort — even if the canal never gets built. Congress also passed a law giving Wang hiring and land-expropriating powers, and exempting his company from local tax and commercial regulations.

While Ortega promises the project will create 50,000 jobs and boost the country’s economic growth to 14.6 percent in 2016 from 4.5 percent in 2013, skepticism abounds. Many of the canal's financial, technical and environmental plans have been kept secret.

Late last month, HKND announced that the environmental and social reports had been completed, and had found the impact would be minimal. The reports, however, are not available for public review.

Project supporters say the canal will rival Panama's, allowing passage to ships too large for the narrower Panama canal.

According to financial statements of the Panama Canal Authority, canal revenue totals $1.6 billion annually. So even if the Nicaragua canal took all of Panama’s business, it would take more than 30 years to pay off the initial cost, not including interest.

The numbers point to the possibility of geopolitical motives outweighing the business opportunity.

According to Hong Kong’s South China Morning Post newspaper, the Nicaragua canal is seen by some Western critics as “Beijing’s back-door plan to make Nicaragua, an ally of Taiwan, switch allegiance to the mainland.”

However, Wang insists the venture is an independent commercial project.

Adding to concerns, it's not clear that HKND has even raised its $8 billion in initial financing.

Asked about investment, HKND told AP that it has "received many contacts from the business sectors and will release [a] progress report at a proper time."

Construction was set to begin at the mouth of the Brito river on Nicaragua's Pacific coast. If completed, the canal will then run across Lake Nicaragua, through rainforest and at least 40 villages requiring resettlement. The canal will then terminate at the mouth of river Punta Gorda in the southern Caribbean.

The project will require massive dredging in Lake Nicaragua, as only about 10 percent of the lake meets the required depth for the canal, according to an investigation by Nicaraguan weekly paper La Confidencial.

Among the nearly 30,000 Nicaraguans who live in the path of the route, many fear the canal does not have to be completed for its environmental impact to be devastating.

Environmentalists have warned that the canal could destroy sensitive habitats and cloud Lake Nicaragua's waters. They are calling for an independent environmental impact assessment that properly studies potential damage to things like biodiversity and water quality in Lake Nicaragua, as well as coral reefs and animal migratory patterns.

The area is also susceptible to earthquakes.  

HKND hired the respected U.K.-based consulting firm Environmental Resources Management about a year ago to assess the environmental and social impact of the project. In a written response to questions from the AP, HKND said the reports would be submitted for approval by the Canal Commission and the government in early 2015.

Telemaco Talavera, rector of the National Agrarian University and spokesman for Nicaragua's Canal Commission, said a number of changes were being made based on the studies' recommendations, such as relocating the planned Pacific port to protect mangroves and shifting the entry to the Caribbean to protect indigenous villages and fish populations.

Rather than dredge the lakebed to make it deep enough for large vessels, Talavera said, the project will use machines to suction the soil in order to keep upturned sediment from clouding the water and shutting down photosynthesis.

Talavera also promised that the canal commission will require the company to pay a fair price for land, rejecting rumors that HKND will be allowed to run roughshod over property owners.

But the project, which some opponents call Ortega's pipe dream, is provoking growing anger, particularly among the autonomous indigenous communities — such as Rama, Garifuna, Mayangna, Miskitu and Ulwa — that it threatens.

Esteban Ruiz was a conscripted Sandinista soldier during the Contra War of the 1980s, during which he said he fled from battles because he didn't want to have to kill anyone.

Now, as the 47-year-old farmer prepares to fight for his land, which sits in the evangelical-dominated community of Rio Grande in the path of the canal, Ruiz said, "I'm not going to run."

With wire services