Caribbean & Central America - July 2013 (ISSN 1741-4458)

Nicaragua last month took a concrete step towards building an inter-oceanic canal with the congressional approval of a US$40bn concession to a Chinese company for the construction and operation of the project. This has since appeared to spur on its neighbours, Honduras and Guatemala to publicise similar plans. While the completion of any of these is still far off, doubts persist as to their feasibility and future success.

Infrastructure projects aimed at reducing the time needed to transport goods from the Atlantic to the Pacific in the Central American isthmus have been around since the 19^th century. For political and historical reasons the Panama Canal project was completed first. Despite the planned Panama Canal expansion, which will accommodate increased traffic and even larger freight ships, the continued increase in global trade has fuelled an interest and awareness of scope for alternative pathways through Central America.

Prior to the construction of the Panama Canal, Nicaragua was considered to present the best prospects for an inter-oceanic route as the San Juan River travels two-thirds the length of the country, from its source in Lake Nicaragua all the way to the Caribbean Sea. This idea of building a new canal or indeed canals (plans to build a ‘dry canal’, comprising a railway line connecting ports in the Atlantic and the Pacific, have also been floated) re-emerged last year [RC-10-12]. While this were initially dismissed as just another declaration of intent, on 13 June Nicaragua’s national assembly awarded Chinese company, HK Nicaragua Canal Development Investment Company (HKND), the concession to build, operate and manage an inter-oceanic ‘Gran Canal’. The Nicaraguan government of President Daniel Ortega has provided very few details as to the project beyond stating that it will make use of Lake Nicaragua although it has clarified that it would not run along the San Juan River, as expected. The plan appears to be to build an entirely new water channel linking Nicaragua’s South Atlantic Autonomous Region (Raas) to the Lake; and the Lake to the Atlantic. The project, which according to HKND will cover 286km (three times the length of the Panama Canal) also envisions the construction of two new deep-water ports, one in the Raas and one on Nicaragua’s Pacific coast.

The news from Nicaragua prompted its neighbours to publicise their own projects. On 17 June during a visit to Taiwan, Guatemala’s President Otto Pérez Molina revealed his government was progressing with plans to build a 372km ‘dry canal’ highway and railway system linking the Atlantic port of Puerto Barrios to the Pacific coast in Jutiapa department. Pérez Molina said his government and its partner, construction consortium, Odepal International SA, were “much more advanced” than Nicaragua in their plans to develop the US$10bn project, which also includes the construction of two new deep-water ports and oil and gas pipelines. This was followed by Honduras’ President Porfirio Lobo’s 8 July announcement that he had signed a memorandum of understanding with the China Harbour Engineering Company Ltd (CHEC) for the construction of a 280km railway linking the Atlantic port of Puerto Castilla to Ampala, Honduras’ main port on the Gulf of Fonseca. According to Lobo, this US$20bn project will include an oil refinery at Puerto Castilla and an oil pipeline linking it to Amapala.

All three Central American countries claim their projects will not compete with the Panama Canal but would “complement” it by providing more trade cargo capacity. Pointing to foreign (mostly Asian) involvement in the projects as evidence of international interest in accommodating future transcontinental trade, the leaders claim the projects are designed to cater for the Super Post Panamax (SPPX) generation of cargo vessels, currently being developed which will exceed the size limits of the Panama Canal expansion (over 366m long and 49m wide). However, what the leaders of these countries fail to address is whether the projects will compete directly with each other and whether there will be a need for all three in the future.

•  Long-distance race

While the race to build a new inter-oceanic conduit across the Central America isthmus is well and truly on, it will be a long and protracted one rather than a quick sprint. Construction on Nicaragua’s “Gran Canal” could start as early as next year but will take 6-10 years to complete. Honduras’ project may involve the shortest distance but is expected to take 15 years to complete according to the government. Meanwhile Guatemala’s, by far the longest canal project in terms of distance, is expected to be completed in seven years after construction begins. However, this depends on the government appropriating all the necessary private land holdings through which the project is to pass, a process that may take years.