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Continued: Nicaragua approves handing massive canal project to little-known Chinese company

  • Article by: LUIS MANUEL GALEANO , Associated Press
  • Last update: June 13, 2013 - 8:04 PM

North American companies are increasingly looking to factories and suppliers in the U.S. and Latin America rather than in Asia, where rising salaries in China are making manufacturing less appealing for foreign companies.

In addition, the global economic slowdown of recent years means large numbers of ships are unused, perhaps 5 percent of the global fleet. Many vessels are scheduled to be completed in coming years, meaning the percentage of idled ships could grow to more than 20 percent, experts said.

And global warming means that even the Arctic may become a viable alternative to crossing Central America by canal.

"Looking at the changing flows and where the growth is in the world economy, personally I'm not seeing it. I wouldn't invest my money in it," said Rosalyn Wilson, a senior business analyst at the Delcan Corporation, a Toronto-based transportation consultancy and author of the U.S. logistics industry's annual report.

"It's addressing a need that definitely is not here now and I'm not sure if it's 'a build it and they will come sort of thing,'" she said.

Eduardo Lugo, a Panamanian port logistics consultant who worked for 10 years studying traffic demand for the Panama Canal's expansion plan, also questioned whether global traffic demand would support the high costs of the Nicaragua project.

"There's going be some growth in world trade. The big question is, what routes is that trade going to move on. That's the real challenge that Nicaragua faces," said Paul Bingham, the head of economic analysis at engineering planning firm CDM Smith, which specializes in large water and transportation infrastructure. "It's very easy to say trade is going to grow but that doesn't mean that Nicaragua is going to be in a competitive position to take advantage of it ... I'm not convinced right now."

Backers of previous canal plans have argued that the Nicaraguan route would prove more economical than Panama's because it would handle ships with far larger cargo capacity.

But the Nicaraguan path would have to be roughly three times as long as than Panama's, which is about 50 miles (80 kilometers) long, a fact that Panama Canal Administrator Jorge Quijano said "gives us even more of a competitive advantage."

"It isn't easy," Quijano said. "The terrain is really complex, more than ours."

Wilson also said the project could have serious impacts on Lake Nicaragua, also known as Cocibolca, because of the amount of fresh water that would be used to operate the canal.

"It takes a lot of water to run locks," Wilson said. "Is it going to be done in such a way that's not trading away another part of the country's economy down the line?"

Roberto Troncoso, president of the Panamanian Association of Business Executives, said China's government may be encouraging the new canal as a way to establish a route independent of the Panama Canal, which is perceived as remaining under heavy U.S. influence.

"The money is totally irrelevant," he said. "We're talking about national hegemony. China is looking to turn itself into the predominant economic power. Whoever dominates trade, dominates the world."

The United States has taken no official position on the Nicaraguan canal.

The Chinese company has declined to comment on the record about its funding and backers.

According to local records, HK Nicaragua Canal Development Investment Co. head Wang Jing has also been a director of about a dozen other companies, some current and others that have been dissolved.

He also heads Beijing Xinwei, a mid-sized telecommunications firm that, according to Chinese media, was partly owned by a large government telecoms equipment company, Datang, which sold its shares in a 2010 restructuring.

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  • People push a boat into Lake Nicaragua, near Granada, Nicaragua. A multi-billion dollar Chinese plan to plow a massive rival to the Panama Canal across the middle of Nicaragua was approved Thursday by the leftist-controlled National Assembly.

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