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China makes major moves in Central America

Monday, April 6, 2015

Chinese investments in major infrastructure projects could stimulate a regional economy, which last year produced goods and services worth $200 billion.

Some Chinese proposals have only a remote chance of succeeding, but others could have a significant impact.

The biggest potential Chinese investment in Central America involves a mega canal, which connects the Atlantic Ocean with the Pacific.

Last month, Beijing expressed interest in a Panamanian project.

A Chinese company is supposedly already building a mega canal in Nicaragua with an investment of as much as $100 billion.

In Mexico, China wants to build a high-speed train connecting the capital with the industrial city of Queretero.

The Costa Rican congress for its part is studying a plan by China Harbour Engineering Company to build a road between the Caribbean port of Limón and the Pacific port of Salina Cruz, as well as a joint venture between the national petroleum companies of both countries to build a $1.5 billion oil refinery.

Each proposal faces obstacles.

A canal could sink into the Nicaraguan jungle, while Panama has little water to sustain a mega canal.

In Mexico, President Enrique Peña last November amid charges of corruption cancelled the Queretaro rail contract, which his transport minister a few days earlier had awarded to a consortium led by China Railway Construction Corporation.

As for Costa Rica, the proposed highway project would connect only minor transport hubs, while a refinery could harm Costa Rica’s image as a green country.

On the other hand, big ships are already being built, for which a route between East Asia and Eastern North America via a Central American mega canal would be 3,500 kilometers shorter than shipments through Suez.

Recent engineering feats such as the Tibet Railway – the world’s highest - and the Three Gorges Power Plant – the world’s biggest – suggest that China can build a super canal.

As for Mexico, China Railway is bidding on a new contract, to be awarded before the end of 2015 for an amount expected to be around $4 billion.

Meanwhile, any new road may be better than nothing in Costa Rica, where infrastructure development has in recent years been stagnant, and where the bad image of a refinery could be offset by expanded production of solar energy.