By Samuel Krawitz |
On December 22, 2014, a groundbreaking ceremony was held in the small city of Brito on the Pacific coast of Nicaragua, marking the start of construction on the Grand Canal of Nicaraguaâ€”the worldâ€™s newest megaproject. The construction is being headed by China through the newly establishedÂ HongÂ Kong Nicaragua Canal Development Investment Company (HKND), led by Chinese businessman Wang Jing.Â The massive project will span 172 miles and cost upwards of USD 50 billion. TheÂ construction plansÂ include ports, power plants, and a bridge over the canal for the Pan-American Highway, as well as proposals for an international airport, free trade zone, and two concrete factories.
China is currently working to increase its influence in Latin America; a region the United States has traditionally considered its sphere of influence. While the canal could act as a major stepping stone in balancing against the U.S. â€œpivotâ€ to the Asia-Pacific region, using the canal in this way is ultimately a double edged sword. Completing the canalâ€™s construction could potentially bring economic and strategic benefits to China and Nicaragua, as well as strengthen Chinaâ€™s ties with Latin America; or, depending onÂ the canalâ€™s impact on the environment and economy in both Nicaragua and its neighbors,Â the canalâ€™s construction could inflict significant damage on Chinese-Latin American relations.
This canal project is just the latest of Chinese attempts to increase its influence in Latin America. Recently, Xi JinpingÂ announcedÂ plans for investments in the region to reach USD 250 billion in the next 10 years, with projections for trade between the China and Latin America to reach USD 500 billion. In addition to the canal, massiveÂ infrastructure projectsÂ are being discussed or are under construction throughout Latin America, including twenty-two dam projects and a transcontinental railway.Â Military engagementÂ between China and Latin America has also been on the rise, mostly to promote good will in countries that are business partners with China. Many of the loan agreements between China and Latin America have very few conditions attached unlike agreements forged with western monetary institutions, making working with China an attractive opportunity.
Value of the Canal for China and Nicaragua
The completed canal is intended to capture the market of triple-e class container ships which the Panama Canal, even with its expansion, would be unable to handle. The Chinese would have the only avenue into the Atlantic which could accommodate these larger ships and could leverage that position to its benefit. The agreement between Wang Jing and Nicaraguan President Ortega also includesÂ a concessionÂ to secure HKNDâ€™s ownership of the canal, facilities, and lands surrounding the canal for the next 50 years, with the option of renewing for another 50 years. According to experts, having a Chinese company operate the canal in a country that is not strategically aligned with the U.S.Â eases Chinese fearsthat the U.S. can block Chinese warships from the Atlantic. Unlike the Panama Canal, the Nicaraguan canal would be free from neutrality agreements. Chinese canal ownership also secures an avenue for Chinaâ€™s energy shipping from the Atlantic, potentially fromÂ off the coast of West Africa or Brazil.
For Nicaragua, the canal would catapult Nicaraguaâ€™s development forward similarly to how the Panama Canal launched Panamaâ€™s development. The canal would create thousands of jobs and put Nicaragua on track from being the second poorest nation in the western hemisphere to one of the regionâ€™s fastest growing economies, with a projectedÂ 14.6% annual growth rate. A canal that brings economic benefits to Nicaragua may entice other Latin American states to cooperate with China in the future, making the canal a worthwhile investment.
Criticisms and Impacts on Chinese Interests
Despite the canalâ€™s potential benefits, there is also a chance the canalâ€™s construction would obstruct Chinese and Nicaraguan interests. Domestic and international critics, including Nicaraguaâ€™s neighbor Costa Rica, fear the canal wouldÂ pollute Lake Nicaragua, a major source of fresh water to Nicaragua and neighboring countries. The planned route alsoÂ runs throughÂ an area with an active hurricane belt, volcanoes, and seismic activity which could further damage the canal, increasing canal costs and deterring shippers from using the riskier route. Furthermore, Colombia has expressed concern overÂ the potential influx of commercial shipsÂ operating near disputedÂ maritime territoryÂ with Nicaragua. Angering Nicaraguaâ€™s neighbors would be detrimental towards Chinaâ€™s pivot to Latin America.
Social impacts to the Nicaraguans may also lead to trouble. Around 30,000 Nicaraguans and indigenous tribesmen live along or near the proposed canal route, butÂ no details have been releasedÂ about relocation plans or compensation. OnlyÂ half the laborÂ working on the canal project is going to be Nicaraguan, with Chinese labor and foreign specialists comprising the other half. With growing protests from the Nicaraguan population, this labor divide could further exacerbate the problems between the Chinese and Nicaraguan people due to anger over lost jobs andÂ an influx of Chinese immigrants. Many Nicaraguans also claim that President Ortega rushed the deal through the National Assembly just to sell the country to the Chinese, diminishing Nicaraguaâ€™sÂ national sovereignty.
As the U.S.Â seeks to renew its focus on Latin America,Â China hopes the canal will increase its sway in the region, not just for the economic benefits but also as a means of demonstrating to the U.S. that they, too, are able to play in anotherâ€™s backyard. However, even if the canal is not completed, the United States must not become complacent. The canal is far from the only tool in Chinaâ€™s repertoire to advance China-Latin America relations. And while the United States has recently taken steps toÂ mend its relationshipÂ with Latin Americaâ€”mostly notably the decision to normalize relations with Cubaâ€”unless the United States makes significant advances in courting its Latin American neighbors, the U.S. may find itself with a China that is too close for comfort.