The planned Chinese canal through Nicaragua has received little attention in the United States, and when it does, the reaction is usually alarmist. Daniel Runde in his Foreign Policy piece provides a typical example: “The canal’s construction should be seen as a geostrategic probe by China. The depth of the canal, a reported 28 meters, should also raise eyebrows as it would be deep enough for Chinese submarines to quickly and covertly cross between the Pacific and Atlantic Oceans.”
But the canal almost certainly will not happen. To the extent that the project should worry the United States, the focus should be on human rights abuses and not on any perceived challenge to the outmoded Monroe Doctrine.
The canal will not happen because it does not make sense. The primary reason is that there is no demand for a second Central American canal, making the project financially unfeasible. In an interview with CNBC, Bruce Carlton, president and CEO of the National Industrial Transportation League, a shipping industry advocacy group, speaking for the vast majority of industry experts said, “I sincerely believe we don’t need another canal. I don’t think there’s enough ship traffic to warrant the construction of another canal.” In addition, at a cost of $40 billion, even if the Nicaraguan canal received all of the Panama Canal’s current traffic (an impossible assumption) it would take 40 years for the project to break even. Add on that the Panama Canal offers faster transit times, that no current American ports can handle ships the size that the Nicaraguans are talking about, and that global warming could possibly open a faster and free route north of Canada, and the whole project seems like a fool’s errand.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
The project’s failure to make financial sense means that its titular head, Wang Jing, will likely not be able to find investors. And given that he has lost 85 percent of his net worth in the recent collapse of the Chinese stock market, his ability to self-fund is doubtful. The claim that the Chinese government will fund the project for strategic reasons is also dubious; because as Phyllis Powers, the former U.S. ambassador to Nicaragua, pointed out to me in an interview, “The Chinese already control the ports at both ends of the Panama Canal.”
Just because the project will not happen, however, doesn’t mean the U.S. should be excused from paying attention to what is happening in Nicaragua. Because President Daniel Ortega has staked so much political capital on the canal project, he is still proceeding as if the project will happen – and the result is that the Nicaraguan people are suffering.
Ortega has always been hesitant to adopt the “Costa Rica model” for his country, even though an economy based on North American retirees and tourism makes the most economic sense. A dedication to revolutionary politics and legacy-building biases him toward grand projects, and a canal plays into both. The Nicaraguan government believed the United States robbed them of wealth when it decided to build its canal in Panama, and not Nicaragua. The claim has some merit, because Washington forced the Nicaraguan government to sign the Bryan-Chamorro Treaty in 1914, preventing them from building a competing canal for 99 years. This, along with the history of other American interventions in Nicaragua, has caused the canal dream to reach almost mythical importance to Sandinista leaders. It is seen as both a panacea for Nicaragua’s economic problems and as a way to rectify a century of humiliation by Yankee imperialists. Unfortunately this passion has blinded Ortega to the fact that a Nicaraguan canal doesn’t make sense in the 21st century.
Wang Jing is an adept businessman, notwithstanding his recent investment troubles, and he likely sensed that he had found a sucker in Nicaragua’s president. Ortega was desperate for a canal, and because a canal makes little financial sense there were few buyers (Russia had recently rejected Ortega’s request for a canal.) When Ortega found Wang, a rich man who showed some interest, Ortega was ready to give away the store just to get a “yes.”
Negotiations between Wang Jing and Ortega’s opera-singing son eventually led to a terrible deal for Nicaragua. Wang’s workers will be immune from Nicaraguan law, able to use eminent domain to take land away from locals at below market rates anywhere in the country, and if the project is completed, Nicaragua will only receive $10 million a year for up to a hundred years. In addition, Wang can walk away from the project at any point and there will be no negative consequences. Wang has already indicated an interest in snatching up the best resort properties in Nicaragua, and this property speculation was likely Wang’s true motivation in beginning the canal negotiations.
The bad deal is already having horrible consequences for Nicaragua. There has been a crackdown on dissent, with campesinos protesting land appropriation being arrested and killed along the proposed route. Furthermore, because the canal law gives the Chinese the ability to take away land at below market rates, many Nicaraguans who own hotels and resorts have stopped investing in their businesses. I talked to one hotel owner on the island of Ometepe who explained to me that the canal plan calls for his hotel to be turned into a golf course. Before the canal law passed, he was planning on expanding his hotel, but that is on hold until he is sure the land will remain his. Business owners, farmers, and indigenous groups are growing increasingly angry with the government; they realize their property might be taken away. As Nicaragua enters the 2016 election year, the repression of dissent will likely increase. A recent “sovereign security law” that makes illegal any act “that threatens the existence of the Nicaraguan state and its institutions” is ripe for abuse.
Nicaragua has a history of being painted by an overly jumpy American foreign policy establishment as a beachhead for some adversarial foreign power in the western hemisphere – first the Soviet Union, and now China. But as in the past, the present worries over a Chinese-built canal are overhyped. However, while American interests might not be under threat from a Nicaraguan canal, values America supports – such as justice and freedom of speech – certainly are
Robert Nelson is a Peace Corps Volunteer serving in Nicaragua. Prior to that he worked at the political consulting firm Hart Research Associates. His work has appeared in American Thinker and Salon. The views expressed belong to the author alone, and do not reflect the opinion of the Peace Corps.