Nicaragua panel OKs canal deal for Chinese group

AP News
Posted: Jun 10, 2013 10:11 PM

MANAGUA, Nicaragua (AP) — A Nicaraguan congressional committee on Monday approved giving a China-based consortium the concession to build and operate a canal between the Pacific and Caribbean, fast-tracking the huge development project over objections from the opposition.

Infrastructure committee president Jenny Martinez said the bill was immediately sent to the National Assembly, which is expected to approve it Thursday. President Daniel Ortega's Sandinista Front controls the national legislature with 63 out of 92 lawmakers.

Opposition lawmakers voted against the proposal, saying the initiative is being rushed and has too many obscure points.

The Chinese company HK Nicaragua Canal Development Investment Co. Ltd. is working with the Nicaraguan government on the canal project, which was announced only last week. Experts say it could take 11 years to finish, cost $40 billion and require digging about 130 miles (200 kilometers) of waterway.

Canal proponents say the waterway could create 40,000 construction jobs and double the per-capita gross domestic product of Nicaragua, one of the poorest countries in Latin America. The government plans to grant the Chinese company a concession for an initial 50 years, with the possibility of extending it another 50.

Critics say there needs to be more information before lawmakers approve the construction of a canal whose location and environmental impact has not been determined. Others have questioned the plan's viability just a few hundred miles northwest of the Panama Canal.

"Since there is no defined path, we can't measure the degree of seriousness of this project," opposition lawmaker Javier Vallejos said.

"This is like putting the cart before the horses," he added, referring to the fact that lawmakers are approving the canal's construction before knowing where it would be built.

Jaime Incer, an environmentalist and adviser to the presidency on environmental issues, agreed with Vallejos and said authorities need to define a specific route before approving a concession.

"There are at least six proposed routes and five of them include Lake Nicaragua, but there is nothing definite, that's all part of the unknown," Incer said.

Ortega hasn't presented an economic feasibility study or environmental impact study on the project. He said last month that it would start in Bluefields Bay on the southern Caribbean coast, go through the center of the country and into Lake Nicaragua and end at the southern Pacific coast.

Deputy Foreign Minister Manuel Coronel, who is chairman of the Grand Canal Authority, said Monday that awarding the concession to the Chinese company guarantees the project will be carried out.

"It's a very serious company, very responsible and recognized," Coronel said. "To doubt (the company) is to oppose the project for political rather than realistic issues."

The Hong Kong-registered HK Nicaragua Canal Development Investment has an office in the Nicaraguan capital. It has said it is willing to fully study the technological, economic, environmental and social impact of the project.

"This is a great project that has the potential to transform international trade and bring significant economic and social benefits to Nicaragua, their neighbors and Latin America," company spokesman Ronald Maclean-Abaroa Maclean said in an interview posted Monday on the group's website.

Under the deal, the Chinese company would pay Nicaragua $10 million annually during the first decade, then pay it a share of canal revenues — an amount that would begin at 1 percent and rise to an unspecified percentage over the life of the concession. After completing the concession, the Chinese company would have to turn over to Nicaragua all buildings and other canal infrastructure.

The concession legislation says the government may expropriate "any property or rights over property" needed to develop the canal.

Jose Aguerri, president of an association of all the chambers of commerce in Nicaragua, said it's crucial for the government to specify the canal's route.

"We have told the committee that until you define the path that the canal will have, it will be difficult to attract investment to the area because there is no legal certainty," Aguirre said after meeting with committee members.

Aguerri said lawmakers also should consult with civic groups and organizations working with the environment before approving the project.

Panama, which already has a steady income flow from its canal, thought long and hard before embarking on a seven-year, $5.2 billion expansion project to allow bigger ships to use its waterway. That project is scheduled to be finished next year.

Nicaragua, on the other hand, has been rushing it canal's approval despite questions being raised by critics. Supporters of building a canal argued in a 2006 presentation that they could capture 4.5 percent of world maritime freight traffic and earn a 22 percent profit margin by 2025, although their cost estimates at that time were much lower than those of the current project.