Feasibility Of Nicaragua's Canal Is Questionable
Nicaragua's ambition to build an inter-oceanic canal seems to be moving forward with the concession of the project having been awarded to a Chinese consortium and subsequently approved in congress. However, we believe this project is unlikely to come to fruition. Considerable political, economic and environmental factors challenge its feasibility. In addition, Nicaragua's fragile economy and insufficient transport and energy infrastructure make this project seem a misguided use of resources.
The century-old idea to build a canal connecting the Pacific and the Atlantic coasts through Nicaragua is most recently estimated to cost US$40bn (almost four times the GDP of the country). The highly ambitious project includes a conventional canal, a rail line ('dry canal'), two airports and an oil pipeline that will take approximately 11 years to build. The canal would involve digging around 200km of waterway to a depth of 60 metres in many places (as reported by Engineering News Record). This project seems out of proportion when considering that currently, the road connecting the Pacific and Atlantic oceans is not even paved.
Despite the government's interest to support this project, with the expectation that it would boost much needed economic growth, create jobs and attract foreign investment, its financial viability is questionable. The concession has been awarded to a Chinese consortium based in Hong Kong and owned by Xinwei, a telecommunications firm. HKND, the newly created consortium, has no track record of infrastructure developments. The Chinese consortium will finance the initial studies and eventually raise the capital required for the construction of the canal. However, we believe that investors are unlikely to be convinced by the profitability of this venture. The consortium will operate the canal for 50 years, with the potential to extend the concession for another 50, following which it will revert to government ownership.
|Carving up the Map|
|Possible Route of Inter-Oceanic Canal|