A shipping canal through Nicaragua to compete against the Panama Canal has been of interest to various parties for nearly 200 years. By all accounts, it now seems to be a real possibility.

 

The Nicaragua Canal, also referred to as the Nicaragua Grand Canal, has long been a proposed shipping route through Nicaragua to connect the Atlantic Ocean with the Pacific Ocean. First proposed in the early colonial era, the proposed shipping route would use the San Juan River as an access route to Lake Nicaragua. The United States, for instance, had interest in constructing a waterway in Nicaragua throughout the 1800s but abandoned those plans in the early 20th century after it purchased the French interests in the Panama Canal.

 

Proposals for such a canal have never really been entirely abandoned, and an article I recently saw on Maritime Executive reports that a Nicaraguan committee has approved a proposed route for a $40 billion shipping channel across the country to compete with the Panama Canal. The committee of government officials, businessmen and academics approved a 172 mile route from the mouth of the Brito river on the Pacific side to the Punto Gorda river on the Caribbean that was proposed by executives from the HK Nicaragua Canal Development Investment Co Ltd (HKND Group). The plan is to finish the canal in 2019 and begin operations in 2020.

 

It is, by all rights, a fairly ambitious plan and the Panama Canal is nearing the end of its expansion project, so one must wonder why anyone would finance the endeavor. The answer is that considering the growing size of ships, even when its expansion project is completed, the Panama Canal may still be too small to accommodate the world’s largest container ships. The proposed passage through Nicaragua would be wider, which consequently would leave the country well placed to capitalize on a predicted rise in global shipping over the next twenty to thirty years.

 

“The rapid growth in east-west trade and ship sizes provide a compelling argument for the construction of a second, substantially larger canal across Central America,” HKND says on its website. “Trends in ship size alone indicate a significant potential market that can only be served by the Nicaragua Canal.”

 

Nevertheless, there are still numerous challenges, and while the canal has the support of President Daniel Ortega and most Nicaraguans, there is a great deal of opposition as well. Legal experts, for example, charge that the deal violates national sovereignty.

 

It seems though that there are two main obstacles. The first is that constructing such a canal would offer the promise of a significant increase in the level of employment in Nicaragua. Although an increase in full-time and well-compensated employment in Nicaragua would potentially have a substantial and long-lasting impact on the country’s economy after a canal is finished, there is no guarantee that it will occur—and that is a red flag to many observers.

 

Perhaps the larger issue is concern about the environment. HKND Group’s plans are ambitious, calling for the construction of major roadways, a coast-to-coast railway system and oil pipeline, neighboring industrial free-trade zones, and two international airports. Opponents of the plan are concerned about the canal’s effect on Lake Nicaragua, which is an important fresh water source for the country. Furthermore, some environmental experts warn that construction could cause profound ecological damage because it would transform wetlands into dry zones, remove hardwood forests, and destroy the habitats of animals including those of the coastal, air, land, and freshwater zones.

 

Personally, I’m not so sure the growth of the size of container ships will outpace the size of the expanded Panama Canal. However, considering the legal and environmental opposition to HKND Group’s plans, I believe this will be an interesting project to watch.