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Bet or bluff? Nicaraguan super-canal

Tuesday, April 5, 2016

The political bluffing over a Nicaraguan super-canal continued last week, with the announcement by the President of the Nicaragua Canal Authority, to the effect that the first part of the project will proceed this year.

The statement by Manuel Krautz confirms an intention, announced a month earlier by HKND Group, to start construction by August of docks and a fuel terminal at what would be the canal’s Pacific outlet.

On the other hand, no such information appears on the website of HKND, which in 2013 won a contract to build and operate the canal for a period of 100 years.

The issue of whether or not the canal goes forward more likely than not depends on how a conflict plays out between China on one hand, and on the other, the United States and several Asian countries, over potentially vast natural resources under the South China Sea.

To the extent that the United States supports the claims of competing countries, China might seek to counter, by establishing a strategic beachhead less than 1,000 miles from Miami.

The United States and the Philippines last week conducted military maneuvers near the disputed area.

Taiwan two weeks earlier claimed sovereignty over parts of the South China Sea, while China on March 8 blamed neighboring countries and the United States for creating tension in the area.

Last February, China installed missiles on several artificial islands it has built in what it considers its territorial waters.

A Nicaraguan canal faces several problems.

No one has a clue as to how much the project would cost, or how much revenue it could produce.

Environmentalists worry about a gap between two parts of Central America, and about the need to dredge lake Nicaragua forever.

On the other hand, the Chinese state – the likely real promoter of the project - can afford to finance a canal, which would have geopolitical benefits.

Nicaraguans – the poorest people in Latin America – might think that the environmental risk is justified by decent jobs and a decent life expectancy, potentially offered by the project.

As far as engineering and construction are concerned, China could almost certainly build a canal, which would be wide and deep enough for the world’s biggest container ships, but which otherwise would be little different from the Panama Canal, built over 100 years ago.