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The Nicaraguan Canal

26 June 2013

The Nicaraguan Canal

By Gwynne Dyer

On 11 June, the Nicaraguan parliament voted in favour of building a $40 billion canal across the country connecting the Atlantic and Pacific Oceans. Since the country is dirt poor, the money would have to come from international investors. It would be raised by a Hong Kong-based firm, HKDN Group, which in return would get the right to build and run the canal for 50 years. But nobody outside Nicaragua took the plan very seriously.

On 15 June, Nicaragua’s president, Daniel Ortega, and Wang Jing, the owner of HKDN, signed a contract that gives the Central American nation 51 percent of the company’s shares. Wang said the capital could easily be raised from Chinese companies and international banks – but since his only business experience has been in running telecommunications firm Xinwei Telecom, again nobody took much notice.

So on 25 June, Wang went public. Speaking in Beijing, he said that he had already attracted global investors. Work on the canal would start in 2014, and it would be open by 2020. “We don’t want it to become an international joke, and we don’t want it to turn into an example of Chinese investment failures,” he said, adding that returns on the project were “sure to make every investor smile broadly.”

Promoters always talk like that, and there would still not be much reason to take Wang and Ortega seriously if it were not for one fact: Chinese businessmen do not launch projects of this scale without the support of the Chinese government. The risk of embarrassment is just too high.

Wang denies that he has official support, of course: “I am a very normal Chinese citizen. I couldn’t be more normal.” But if Beijing really is behind the project, then it may actually happen. So what would be the implications of a 286-km. (178-mile) waterway connecting the Caribbean with the Pacific via Lake Nicaragua.

For Nicaragua, they would be huge. The Nicaraguan government claims that work on the Great Interoceanic Canal and associated projects – a “dry canal” freight railway, an airport and two duty-free zones – could double Nicaragua’s GDP and triple employment by 2018. In a country that still does not have a proper highway connecting its two coasts, that would change everything.

For Panama, whose existing canal has been the mainstay of the country’s economy for a century, the competition would be very serious. A $5 billion project to double the Panama Canal’s capacity by building a third chain of locks across the isthmus is nearing completion, but it will still be restricted to taking ships of 65,000 tons or less.

The rival canal in Nicaragua would be able to accommodate the new generation of ships ranging up to 250,000 tons, but there will not be enough shipping to keep both canals in business unless world trade continues to expand rapidly. In any case competition in transit rates would be fierce, and it might well come to pass that neither canal was very profitable.

Then there is the environmental question. The new route would cross Lake Nicaragua, the region’s largest fresh-water lake, bringing with it not only pollution but the risk of introducing salt-water species that could disrupt the lake’s ecology. But if it is forced to choose between economic growth and environmental purity, there is no doubt that Nicaragua’s government would choose growth.

The biggest question, however, is strategic. The United States built the Panama Canal and ran it for many years. Two-thirds of the cargo that goes through the Canal comes from or is going to US ports, and American warships still have the right to jump the queue of ships waiting to go through.

As a country with coasts on both the Atlantic and the Pacific, the United States sees control of the fastest way between the two oceans as a high strategic priority. Despite the hand-over of the existing canal to the Panamanian government in 1999, at the moment the US still has that control. It would have far less control over a Nicaraguan canal, and will doubtless do its best to derail the project.

That’s an inevitable strategic reflex, but it is not necessarily the case that a Nicaraguan canal would really lessen the US Navy’s strategic dominance in the region. Nothing is more vulnerable than a canal in wartime, and even in confrontations where force is not yet being used canals are easily blockaded. And although the Chinese navy no doubt enthusiastically backs the Nicaraguan project, it’s hard to see what real strategic advantage it would gain.

The new canal is certainly feasible from an engineering point of view. It may be viable economically, depending on cost factors that have not yet been calculated and on the rate of expansion of world trade. But its fate will probably be decided by the Chinese government’s willingness to back what is, for China, a vanity project.

And that, in turn, will depend on whether China’s economy remains strong enough to afford such an indulgence. At the moment, I wouldn’t bet on it.


To shorten to 725 words, omit paragraphs 2 and 9. (“On 15…notice”; and “Then…growth”)



Nicaraguan Time Warp

8 November 2006

Nicaraguan Time Warp

By Gwynne Dyer

“Ortega is a tiger who has not changed his stripes,” warned US ambassador Paul Trivelli before the former revolutionary leader won back the presidency of Nicaragua in the election on 6 November. Retired US Marine colonel Oliver North, who took the fall for president Ronald Reagan’s administration in the Iran/Contra scandal of the 1980s, showed up to warn that Ortega was as bad as Adolf Hitler. And Daniel Ortega just smiled and said: “Jesus Christ is my hero now.”

It’s deja vu all over again as American leaders denounce the Communist threat in Nicaragua and leftist Latin American leaders like Cuba’s Fidel Castro and Venezuela’s Hugo Chavez celebrate the rise of the “pink tide” in their region. Old images of the Sandinista revolutionaries

and their “sandalista” foreign admirers (left-wing youths who came to help the revolution by picking coffee beans and drinking lots of cheap rum) fill the media. Seventeen thousand foreign observers and a thousand journalists came to Nicaragua for the elections. But the whole drama is Hamlet without the Prince.

Daniel Ortega was once a revolutionary leader, but that was a quarter-century ago. Now he is a populist politician as cynical as any of his opponents, and the likelihood that his election will make any difference to Nicaragua’s poor is slim.

The Sandinista revolution that overthrew the Somoza family dictatorship in 1979 might possibly have made some difference to the people at the bottom of society — and the bottom is a long way down in Nicaragua — if it had been left alone to get on with the task. But it was the height of the Cold War and the US didn’t want “another Cuba,” so the Reagan administration armed and financed an army of right-wing exiles, the “contras”, to wage a guerilla war against the Sandinistas.

President John F. Kennedy’s similar attempt to strangle the Cuban revolution in its cradle ended in defeat and ignominy at the Bay of Pigs in 1961, but Ronald Reagan had more luck. He got around a Congressional ban on US government aid to the contras by turning a blind eye to White House aide Oliver North’s fund-raising efforts, which involved selling US arms to Iran with a secret mark-up that was then passed on to the contras. (When North got caught, Reagan escaped impeachment by claiming that he could not remember having been told about it.)

Ortega was elected president in 1984, but the constant attacks of the contras (between 30,000 and 60,000 Nicaraguans were killed in Reagan’s war) ensured that the Sandinistas never achieved any real transformation in Nicaragua. It’s questionable whether they would have done so even without that distraction, for the leading Sandinista leaders were mostly well-intentioned middle-class boys radicalised by the brutality of the Somozas, but with little self-discipline and even less by way of a plan.

There were kibbutz-style communal farms for peasants on land confiscated from the rich, and literacy classes for all, but the confiscations were almost random, and too often ended up in the pockets of Sandinista leaders. When Ortega left the presidency in 1990, he bought the confiscated million-dollar mansion of a contra supporter, Jaime Morales, for $2,000 — and he still lives there.

Ortega never suspected that he would lose the presidency in 1990, so he invited the whole world to come and observe the election in which he and the Sandinistas were booted out by the disillusioned Nicaraguan voters. In three subsequent runs for the presidency he never got more than 40 percent of the vote, although Sandinistas continued to control many courts, municipalities and unions. His road back to power, however, was paved by “the pact” of 1999, a flagrantly corrupt deal with then-president Arnoldo Aleman.

At the time Ortega was facing charges of rape by his step-daughter, while Aleman was embezzling huge amounts of money from the government. So the two men agreed to give themselves lifetime membership of the National Assembly, which gave them both permanent immunity from prosecution. Ortega also got the threshold for a first-round victory in presidential elections lowered from 50 percent to 40 percent — or even 35 percent, if the front-runner was five percentage points ahead of the next candidate.

“El pacto” didn’t save Arnaldo Aleman in the end. An outraged Congress stripped him of his legal immunity and he was given a 20-year sentence in 2003 for stealing about $100 million from the Nicaraguan people. But a Sandinista-run court allowed him to serve his sentence at home on his ranch due to “health problems” — and the pact has now given Ortega the presidency with less than 40 percent of the vote. (Under the old rules, there would have been a second round in which the 60 percent of Nicaraguans who don’t want Ortega back would unite behind a single candidate, as they did the last three times.)

Ortega is back, but socialism isn’t. He now presents himself as a devout Catholic, and recently voted for an absolute ban on abortion. His vice-president is Jaime Morales, the former contra supporter whose confiscated mansion he still lives in. And all the excited promises by Venezuela’s Chavez to support the new Nicaraguan revolution with cheap oil, and all of Washington’s threats to cut aid and trade to a neo-Sandinista Nicaragua, are just time-warp fantasies about what used to be. The revolution was cancelled long ago.


To shorten to 725 words, omit paragraphs 2 and 5. (“It’s deja…Prince”; and “President…it”)