Complications With The Nicaraguan Canal

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People with a banner reading ‘No to the canal’ protest by burning tires against the inauguration of the building of the Nicaragua Canal.

In the late 18th century, the French tried to build a canal through Panama, but endured harsh variables, such as yellow fever, and soon ran out of both men and money. Then the United States stepped in, helping Panama declare independence from Colombia, in return for a 99-year lease on the land where they wanted to build the canal. In 1904, Theodore Roosevelt began construction of the Panama Canal. Opening nearly 10 years later, the canal has allowed ships to forgo the longer and more dangerous journey of traveling south of South America via the Magellan Strait. Until 1999, the United States managed and then co-managed the canal with Panama, as called for by the Treaties. The canal has provided a great source of revenue, helping to pay for a social safety net and keeping infrastructure maintained for the Panamanian people.  Even after fully giving back ownership and control of the canal to Panamanians, there is still a strong American association with the canal. Further, Panama and the U.S. have a good relationship, helping to promote the United States’ sphere of influence in Central America. The canal is the most symbolic piece of that influence. 

For years, no country ever challenged U.S. control over the canal, nor did any country forgo using the canal due to its association with the U.S. Even during the most hostile moments of the Cold War, the Soviets would still send cargo ships through the canal. The only other country ever even deemed geographically feasible of having a canal that stretches from the Pacific to the Atlantic is Nicaragua. Steps towards the construction of the Nicaraguan Canal began when Nicaraguan President Daniel Ortega approved the creation of a special canal zone.  

With the Panama Canal having been built over 100 years ago, the entire design is outdated, and not wide enough for the largest of modern day cargo ships, although its recent expansion allows for larger(neopanamax) vessels which carry about double the capacity of prior vessels. However, the Nicaraguan canal isn’t only being built to provide an alternative to the dated Panama Canal.

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Adapted from Aljazeera America

In 2016, Nicaragua leased land to The Hong Kong Nicaragua Canal Development Group (HKND), a private Chinese company. Under the terms of the agreement, the HKND will pay Nicaragua $10 million a year to have control over the necessary land to build a canal, and then give Nicaragua 1% of canal revenues. As was the case with the Panama Canal, this a 50-year agreement with another 50 year-option, meaning that Nicaragua will assume co-ownership in 50 years time and full ownership in 100 years. Unlike the case of the Panama Canal, though, a private company will manage and predominantly profit form the canal. 

The effectiveness of a private company in such a substantial infrastructure endeavor provides an interesting case study. Many questions, such as how greatly can HKND profit from the canal, and whether HKND will even be able to build the canal, have gone unanswered.

The biggest controversy surrounding the Nicaraguan canal has been the legality of a private company controlling another county’s land. In theory, the HKND could evict anybody they want in order to build the canal. On the contrary, HKND could profit from the citizens, by only offering products that are made by or associated with HKND. The deal included few protections for Nicaraguans living in the canal zone, which has drawn the ire of many. There has even been debate as to whether the Constitution of Nicaragua applies to HKND controlled land. In the case of the Panama Canal, the canal zone became a United States territory, and therefore followed U.S. laws. 

The canal has become extremely unpopular in Nicaragua, with President Ortega distancing himself from the project. Construction has not even begun, as the HKND has struggled to receive financing. Recently, the Chinese government has appeared willing to fund HKND, but discussions are still in the early stages. Although at the time of writing it appears less likely, the canal might very well still be built; mainly due to the fact that Nicaragua cannot stop the work of HKND, who have full control over the land for the next 50 years.