Nicaragua's Planned $50 Billion Canal Is 'A Gigantic White Elephant'

In June 2013, Nicaragua gave initial approval for what seemed like a ridiculous plan to let a Chinese group build a 173-mile canal across the Latin American country.

On Monday, workers broke ground on one of the largest infrastructure projects ever.one of the biggest infrastructure projects ever.

Reuters

There's just one problem: No one really knows what's going on.

Ask Manuel Coronel, an octogenarian who runs the canal authority, "where construction will begin and who will pay for it, and he has no answers," The Economist reports. "Neither does HKND, the Hong Kong-based company run by Wang Jing, which is to build the $50 billion waterway."

In fact, the government of Daniel Ortega has not yet released a feasibility study, environmental-impact report, business case, or financing plan.

"It's a gigantic white elephant," said Jean-Paul Rodrigue, an infrastructure expert at Hofstra University, told The Wall Street Journal.

"You sell the country a big dream, you get an open door and you score big with real-estate development," Rodrigue continued. "The great majority of the project that has been shown by Chinese developers are real-estate projects. They seem to be using the canal as an excuse to sell real-estate projects, golf courses, and hotels."

REUTERS/Jairo Cajina/Presidential Palace Nicaragua/Handout via ReutersNicaragua's President Daniel Ortega (L) and Wang Jing, chairman of the Hong Kong international company Nicaragua Canal Development Investment Co. (HKND Group) celebrate signing a concession agreement for the construction of an inter-oceanic canal in Nicaragua at the Casa de los Pueblos in Managua June 14, 2013.

Last year, Ortega allies in Nicaragua's Congress passed legislation granting HKND a 50-year concession to build and operate the canal in return for $10 million a year once it's up and running. The law gives the Chinese developers huge leeway - even if the canal project fails.

"The law lets HKND develop ancillary projects - ports, an airport, roads, a railway - even if the canal doesn't get built," Luis Galeano of Associated Press notes.

If the building goes ahead as planned, there are serious environmental concerns given that the canal would pass through the middle of Lake Nicaragua, the largest source of fresh water in the Latin America.

"We're at a crossroads because either you use Lake [Nicaragua] for floating boats or you use it for drinking water, but you can't use it for both things at once," Victor Campos, assistant director of the Humboldt Center environmental organization, told the Associated Press last year. 

Rodrigue, the transportation expert, told WSJ that he "didn't believe the canal would be able to compete with an expanded Panama Canal, whose new set of locks is expected to be operational by 2016 and will be able to handle ships carrying up to 12,000 containers. Neither does he expect Mr. Jing will be able to raise the financing."