In a placid lagoon about a mile inland from the Atlantic coast in southeast Nicaragua, the mast of Cornelius Vanderbilt’s dredge boat rises out of the water. The railroad tycoon abandoned it along with his dream of building an interoceanic canal in the 1850s. More than 160 years and several failed plans later, Wang Jing, a 40-year-old Chinese telecommunications billionaire, has emerged as the next mogul to give it a go. Nicaraguan President Daniel Ortega, who fought the U.S.-backed contras in the 1980s, signed a 50-year concession on June 14 that grants Wang’s HK Nicaragua Canal Development Investment Co. (HKND) rights to develop a $40 billion project that includes a canal, an oil pipeline, two deepwater ports, an interoceanic railroad, and two airports.
The project’s announcement and hurried congressional approval have been met with skepticism. The first of many Nicaragua canal schemes was hatched during the administration of U.S. President John Quincy Adams. The latest has some analysts scratching their heads. “The process of this project’s development has been extremely strange and has left many questions unanswered,” says Esteban Polidura, a Latin American analyst at Deutsche Bank (DB). “We have lots of doubts that this is a serious and viable project.”
Wang, whose HKND Group launched its website just days prior to the concession signing, is relatively unknown. “Why Wang Jing?” asks Margaret Myers, China and Latin America program director of Inter-American Dialogue, a Washington research group. “He has no experience in canals or large infrastructure projects. He is a telecommunications guy in China.”
Wang is chairman of more than 20 enterprises in 35 countries, including Beijing Xinwei Telecom Technology, according to the website. He’ll be owner and chief executive officer of HKND, which describes itself as an international infrastructure developer that will design, build, and operate the canal, its first project. “Here is the ghost,” Ortega said when Wang appeared to sign the concession on June 14. “He’s flesh and bone.”
Ortega, the Sandinista leader who has held power since 2007, says the project would combat poverty and bring prosperity to Nicaragua, the Western Hemisphere’s second-poorest country after Haiti. An interoceanic canal could double Nicaragua’s per-capita gross domestic product from its current $3,300, the government says. No one has explained where the $40 billion to build the canal will come from. “We are going to complete our mission to develop the economy of Nicaragua and Central America and improve the future of maritime trade between the West and East,” Wang said at the concession signing. “We will change the world.”
The project comes as Panama prepares to finish a $5.25 billion expansion of its 99-year-old canal. On June 20, Honduras announced plans to work with a Chinese company on an Atlantic-to-Pacific railroad to boost trade across the Central American isthmus. “I think it is the right time now given the expanded ship sizes out there,” says Bill Wild, a former deputy CEO of Australia-based contractor Leighton Holdings (LEI:AU) and HKND’s chief project adviser. “Even the Panama Canal can’t come close to handling the big ships being built.” The Panama Canal Authority refutes this.
HKND has called on consultants Environmental Resources Management to conduct an environmental and social impact assessment for possible canal routes. HKND has asked China Railway Construction (1186:HK) to do the initial technical feasibility assessment, according to a company statement. “They are setting up various mechanisms to at least explore the possibility of a canal with more seriousness, which is something we haven’t seen in the past,” says Myers of Inter-American Dialogue. Says Wang of his project in an interview: “I don’t want it to become a joke or an example of a failed overseas Chinese enterprise.”
Hundreds of Nicaraguans protested outside the National Assembly in Managua on June 13, the day of the canal law’s landslide approval by the Sandinista-majority Congress. Green groups and opposition lawmakers expressed concern about potential damage from the canal, which would likely pass through Lake Cocibolca, Central America’s largest. Wild says the $40 billion price tag may be too low and that the initial focus will be on the canal over the pipeline and airports. The canal “has to stand on its own,” he says. “We have to come to grips with what the numbers are.”