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Focus: Global Supply Chain and Logistics

Our Weekly Feature Article on Topics Related to Global Supply Chain & Logistics
 

From SCDigest's On-Target e-Magazine

- Sept.29, 2015 -

 

Global Supply Chain News: As Crazy as it Sounds, Nicaragua Grand Canal Might Just Happen


Project Seems Preposterous, but Nicaragua Government, Chinese Company Say Effort will Kick-Off in Early 2016

 

SCDigest Editorial Staff

 

While most of the buzz these past few years has been about the logistics impact of an expanded Panama Canal that will be able handle larger ships when the project is finally finished sometime in 2016, a plan for a competing canal in Nicaragua, which at many levels seems an impossibility, may actually just happen.

The Nicaragua Interoceanic Grand Canal project would create a waterway some 276 kilometers long, including the use of Lake Nicaragua for a good portion of the passage. It would have even wider lanes than the expanded Panama Canal, allowing even larger megaships to use its service, though whether this makes any sense give US port dynamics is questionable.

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So is this a real project that will come up with the massive funding required to get it off the ground, or some half-baked notion that in the end will fall of it own weight?

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"And the project sponsors say the cost will for the effort will be about $50 billion - for times Nicaragua's annual GDP - but Panama Canal Authority CEO Jorge Quijano said last summer that he estimates the project will cost more like $67 billion-$70 billion.

Can that kind of money really be raised for a project that is financially questionable to say the least?

The Nicaraguan government of Daniel Ortego has given a 50-year commission to build and then manage the canal to a Chinese company called HKND Group. The canal if built would run from the Pacific coastal town of Brito to the mouth of the Punta Gorda River on Nicaragua's Atlantic side.

In addition to the canal itself, the project intends to also include two deep water ports, an airport, an artificial lake, two sets of locks, a tourist complex, a free-trade zone, roads and cement and steel factories.

The Reuters news service reported in December that HKND had "identified" $200 million in funding for the project, but there has been no other mention of where the money will come from, and of course that sum is but a small fraction of the tens of billions that will be needed for construction.

Might the Chinese government step in to provide a large chunk of the funding from its $3.5 trillion in foreign reserves? Chinese officials have denied it is behind the concession held by HKND, but it is one of the only sources that would seem perhaps interested and capable of bankrolling such a massive project, which would give it an important foothold in the Americas.

The project is estimated to require about 50,000 workers, half of which Ortego says will be Nicaraguans, but that means perhaps 25,000 could be shipped over from China.

Despite so few details relative to financing, operations and more, the Nicaraguan government continues to say construction will begin at the end of the Q1 2106. To that end, there was news last week that HKND announced Australia's CSA Global had kicked off the process of aerial surveying of the proposed route of the canal. It said with the final survey reports are scheduled for delivery by March 2016.

HKND said the survey will enable the assessment of geological risks including seismic and volcanic activities, tsunamis, landslides, slope stability, and liquefaction.



(Global Supply Chain Article Continued Below)

 
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There has been strong opposition to the plan from environmental groups, saying the impact to the ecosystem could be devastating, and also from thousands of Nicaraguans who will be displaced from their current dwellings by the project.

The Nicaraguan government has funded several environmental studies, but none has yet been made public, though Ortego has said all the recommendations in the studies will be adhered to as part of the project plan.

HKND estimates the project will displace 28,000 people living in the zone and says that they will not be relocated more than 12 kilometers (7.5 miles) from their original communities.

Another big question is whether there is any actual utility of the project. While the competition might keep the costs to use the Panama Canal down, would there really be enough volume to keep two competing canals going?

The Nicaraguans say their canal will have an advantage by having wider lanes that will allow even the largest container ships to use its canal, while even the expanded Panama Canal will still only be able to handle mid-sized ships.

But US East Coast ports themselves can't handle the largest ships, meaning there is no practical advantage to having a canal capable of supporting them from Asian origins.

So is this a real project that will come up with the massive funding required to get it off the ground, or some half-baked notion that in the end will fall of it own weight? We should know sometime in early 2016, if the Chinese and the Nicaraguans really start moving dirt or not.


What do you think of this Nicaraguan Canal? Strange fantasy or real potential? Would it have any real value to shippers or container lines? Let us know your thoughts at the Feedback button (email) or section (web form) below.


 

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