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Monday, July 22, 2013

Chinese Company Attempts To Build Panama Canal Alternative

Photo of Panama Canal Gatun Locks. (Wikimedia Commons)

Photo of Panama Canal Gatun Locks. (Wikimedia Commons)

If you want to get from the Pacific Ocean to the Atlantic Ocean by ship, you don’t have a lot of options.

You can go around the Cape Horn, the southern point of South America, which will take you a long time. Or you can go through the Panama Canal, which is a lot quicker if you’re going from, say, Shanghai to New York.

Because of all the traffic going through that 110-foot wide canal, they are expanding it to double the capacity and allow larger ships through.

Meanwhile, Nicaragua wants to build its own canal. The government recently awarded a Chinese company a contract to do just that.

Guest

Transcript

JEREMY HOBSON, HOST:

This is HERE AND NOW. If you want to get from the Pacific Ocean to the Atlantic by ship, you do not have a lot of options. You can go around the Horn of South America, which will take a very long time, or you can go through the Panama Canal, which is a lot quicker if you're going from, say, Shanghai to New York.

But because all that traffic going through that 110-foot-wide canal is getting worse, they are going to expand it to double the capacity and allow larger ships through. Meanwhile, two countries north of Panama, the Nicaraguans want to build their own canal. The government recently awarded a Chinese company a contract to do that.

And for details we're joined by Bill Faries. He is Miami bureau chief for Bloomberg News. He joins us from WLRN in Miami. And first, Bill, just tell us a little bit about this plan.

BILL FARIES: The Nicaragua Canal Plan is something that's literally been around since the Spanish conquest of the Americas. It goes back 400 or 500 years, because of Nicaragua's geography. They have this large lake on the western side of the country, separated from the ocean by a small isthmus.

So there's long been a plan that if you were going to have a canal through Central America, Nicaragua was the place to do it. Jump back maybe to the late 1800s, there was quite a fight between authorities in Panama and Nicaragua over who would win the rights to have this canal.

As it turned out, the French started working on a canal in Panama and got the jump on Nicaragua. But that dream has never really died, and Nicaraguan President Daniel Ortega just jump-started that dream again by awarding a 50-year contract to a Chinese company to build a canal they estimated at about $40 billion.

HOBSON: And I want to get to that in a minute, but first of all, why didn't the Nicaraguan canal happen first? Is there a geographical difference that's important?

FARIES: There was. The backers of the Panama Canal tried to make a - well in the end made a persuasive argument that the earthquakes and volcanoes in Nicaragua would make it a riskier project. And after Teddy Roosevelt came to office, he ended up supporting an insurrection in Panama with the goal of winning access to a canal project that the French had already started and were looking to get out of at that point.

HOBSON: OK, so bring us to 2013. What do we know about this Hong Kong-based company that won the contract to build and manage the canal? How much do we know about this company?

FARIES: We knew, I would say, nothing about this company about a month ago or six weeks ago. The CEO of this - it's a telecom company based in Beijing. The CEO is a guy named Wang Jing. Some reporting by my colleagues in China turned up that Mr. Wang is probably a billionaire, but he's not someone that, as far as we know, has any experience in infrastructure projects, certainly has never built something of this scale.

So the announcement that he and his company, HKND, had wont his contract was met really with a lot of skepticism around the world.

HOBSON: Why is there a need for another canal? Why would a company be interested in doing this?

FARIES: The main interest, at least from Nicaraguan side, is to tap into some of this growth in global trade. Panama has really had a boon because of its control of the Panama Canal. But Nicaragua being, it's the second-poorest country in Latin America after Haiti, you can certainly imagine them looking a little bit in envy at this cash machine that the Panamanians seem to have.

HOBSON: But would there be demand for the expanded Panama Canal and a Nicaragua canal and perhaps a way to get through the Arctic?

FARIES: That's - it's a fair question. I want to throw a third project into this mix here because Honduras this year approved plans to build a railway from their east coast to the west coast, along with building two new ports. That, a lot of people would say, is probably a more realistic project, certainly a less expensive one. Whether global trade needs two canals through Central America and a railway is, it's hard to see that right now.

HOBSON: I've read that one of the reasons that some think this is a good idea is the boom in shale gas in the United States may create the demand to ship that overseas and perhaps through the canal to Asia.

FARIES: For sure. I mean, when you think about the importance of the Panama Canal today in the United States, a lot of the goods, you know, thinking about iPads, iPhones, a lot of electronics from - that are getting shipped from Asia are coming through the Panama Canal to the U.S. east coast.

Now this revolution we've had in shale gas means that the United States may become an exporter of liquefied natural gas really for the first time. And a lot of that gas will come from ports on the east and the southeast and would go west towards Asia through the canal.

So I think the Nicaraguans are being, they're being very timely in this, and I think Nicaragua thinks there's room enough for two canals, given that - how much trade may increase between the United States and Asia.

HOBSON: Let's talk about some of the challenges here. There are environmental questions about this. Lake Nicaragua is Central America's largest freshwater reserve, and this canal would have to go right through that, right?

FARIES: It would. I mean, it's the only way to really make this kind of a plan viable. So you have a freshwater reserve for Nicaragua and the region that would be at risk, whether it's bringing in saltwater intrusion or whether it's bringing in invasive species or just pollution from all the traffic that would come through.

Well, one of the other obstacles here is just how the rest of the canal would get built. To get from basically the Caribbean side of Nicaragua to Lake Nicaragua, the natural path would be through perhaps the San Juan River, which is on the southern border.

Unfortunately, Nicaragua and Costa Rica have a lot of disputes about that river and exactly where the border is. So that's not really seen as a very likely location. Once you rule that out, there are some river valley you could go through, but it would be a much more difficult, much more of an overland process that makes the price tag on this go up much higher and raises a lot of environmental concerns, as you mentioned.

HOBSON: And there's a 20-foot tide differential between the two coasts that this canal would have to bridge.

FARIES: It's going to be a real logistical challenge. We said at the beginning that this has been a dream for, you know, 400 or 500 years. There are still the rusting dredge boats from Cornelius Vanderbilt's efforts over 100 years ago on the southeast coast of Nicaragua.

HOBSON: Wow.

FARIES: It is hard to imagine. I mean, to give you a sense of the scale of this project, the Nicaraguans say that the entire thing would be about $40 billion. The entire economy of Nicaragua is about $10 billion. All Nicaragua has done at this point is offered a concession to this Chinese company, HKND. The company still has to come up with the estimated $40 billion. And as far as we can tell, it doesn't have it. it has to raise that investment. So there's still a huge number of barriers to overcome before this happens.

HOBSON: And yet the Chinese may be willing to give some very low-interest loans to make this happen, right?

FARIES: Certainly, although one issue is that even at this point, oddly enough, Nicaragua does not have diplomatic relations with China. So they still recognize Taiwan and not mainland China. So I think that in and of itself would be a bit of a barrier for Chinese financing.

HOBSON: So Bill Faries, is this canal going to be built in Nicaragua? What would you say the chances are at this point?

FARIES: I, you know, I think there are a lot of barriers in terms of the environmental issues, the logistical issues, political issues in Nicaragua. I don't plan on floating down the Nicaragua canal anytime soon.

(LAUGHTER)

FARIES: But who am I to say that it can't happen?

HOBSON: Bill Faries is Miami bureau chief for Bloomberg News, talking with us about the potential of a Nicaragua canal. Bill, thank you so much.

FARIES: Thanks for having me, Jeremy.

HOBSON: And of course the trouble with the Nicaragua canal, which we did not talk about, is that it would be terrible news for palindrome lovers because a man, a plan, a canal, Nicaragua does not work. News is next, HERE AND NOW. Transcript provided by NPR, Copyright NPR.


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