Naughty or nice? Nicaraguans promised canal as 'Christmas present'

Thursday, November 20, 2014

Preparatory construction works on Nicaragua's controversial US$40bn inter-oceanic canal will get underway on December 24, according to a government source.

"The Nicaraguan people will get a big Christmas present," Paul Oquist, a close adviser to President Daniel Ortega, said in an interview with British newspaper the Guardian. Works are set to begin on construction of roads and a wharf, he added.

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Chinese company HKND – which last year was awarded a 50-year concession to develop and operate the inter-oceanic shipping canal – will spend some US$900mn on feasibility studies, Oquist said. Consulting firms including London-based Environmental Resource Management and McKinsey contributed to prefeasibility studies and would continue with the feasibility studies.

"No one makes a US$900m bet without information, so you think they must have pretty good information from the pre-feasibility studies that this is going to work out," he was quoted as saying.

Other areas to be developed under the concession include a dry canal served by a railway line, free trade zones on the country's Pacific and Caribbean coasts, an international airport and two deepwater ports.

The preparatory works are to get things ready for when the final green light is given, as any delay to the five-year timeline would result in costly interest payments on loans of billions of dollars, Oquist said.

However, the project has not been without its detractors. Environmental activists claim that works on the canal would affect Nicaragua's water quality and supply, while others claim that the concession award lacked transparency. Others fear that Nicaragua – which received US$1.5bn in FDI last year – would be unprepared to receive or deal with such a sizeable investment.

If it sees the light of day, Nicaragua's inter-oceanic canal would compete directly with Panama's legendary 100-year-old canal.