Nicaragua Has Big Expectations For Its Canal

Lake Nicaragua is the center of the Nicaragua Grand Canal.

Published Aug 14, 2015 3:05 PM by The Maritime Executive

Egypt and Panama have proven canal for commerical shipping can be profitable and lend themselves to being major players in world trade.

But, now here comes Nicaragua that is getting a $50 billion investment from a Chinese based investment group. In June 2013, Nicaragua’s National Assembly approved a bill to grant a 50-year concession to the Hong Kong Nicaragua Canal Development Company to finance and manage the project.

HKND Group is a privately-held international infrastructure development firm headquartered in Hong Kong and with offices in Managua, the capital of Nicaragua. HKND Group has extensive experience in construction management and infrastructure development. HKND Group is led by its Chairman and Chief Executive Officer, Mr. Wang Jing, businessman and investor.

The Nicaragua Grand Canal will run through Lake Nicaragua and run as a connection between the Atlantic and Pacific oceans.  Construction of the canal began in December 2014 and it is expected to open in 2020. 

The 173-mile canal will have three sections.The West Canal will run from Brito at the Pacific Ocean up to the Rio Brito Valley and enters Lake Nicaragua, which is the center of the canal. The Eastern Canal will run along the Rio Tule valley through the Caribbean highland to the Rio Punta Gorda valley to the Caribbean Sea. 

Nicaraguan government foresees a commercial waterway that will reshape international trade and lift the nation out of poverty. The project will generate about 50,000 jobs during its construction phase, and another 200,000 jobs once it is operational. A free trade zone with commercial facilities as well as tourist hotels and an international airport at Rivas will be built as well.

Nicaragua has seen a steady growth of 5% in GDP over the past three years, but 43% of Nicaraguans live below the poverty line.

The Panama Canal, whose expansion is expected to be completed by 2016 and already handles about 14,000 ships a year, is nearing completion. Many wonder if there is enough demand for a second shipping route in Central America. The Panama Canal currently accommodates vessels capable of carrying 5,000 TEUs and will able to handle ships transporting 13,000 TEUs when the project is completed. But Nicaraguan officials contend that its canal will accommodate ships up to 23,000 TEUs.

Protesters have also voiced concerns regarding the canal’s environmental impact. Lake Nicaragua is Central America’s largest freshwater lake and many fear it will be contaminated. To accommodate the new generation of ships that will go through the canal, a trench 65-mile, 1,700 feet wide and over 90 feet deep will be dredged in Lake Nicaragua.

Critics fear that the dredging of the will have a disastrous impact on aquatic life by introducing invasive new species and releasing toxic chemicals into the water system. Others also expect the lake’s salt levels to rise once the canal reaches the Pacific Ocean.

Small-business owners on the shores of Lake Nicaragua have also expressed fears that the canal could affect their trade. And reports estimate that 120,000 Nicaraguans could be dislocated due to the project.