Trade waterway: $20bn and 10 years to build - a giant rival for Panama canal
Nicaragua plans vast channel for largest ships Opponents cite green issues and lack of demand
John Vidal Environment editor
4 October 2006
The Guardian
Nicaragua, one of the poorest countries in Latin America, plans to construct a $20bn rival to the Panama canal to enable the largest tankers and container ships in the world to pass between the Pacific and Atlantic oceans.
The mega-engineering project is expected to take more than 10 years to build but could redraw the map of world trade by opening the east coast of North America, Europe and Brazil to large-scale sea traffic from burgeoning Pacific rim countries including China, and South Korea.
The new route would cut 500 miles - or at least a day - off the route between California and New York, and could considerably shorten and cheapen the journey from China to Europe for large ships.
Yesterday's formal announcement of what is known as the Grand Inter-Oceanic Nicaragua Canal was greeted with trepidation by nearby Panama, which is also planning to widen its canal. It fears that its main source of income will be seriously affected if Nicaragua builds a rival.
If built, the Nicaraguan canal would allow 250,000-tonne tankers and container ships to pass through the isthmus that divides the two oceans, compared with the Panama canal's 79,000-tonne boats. Even if an expected $5bn (pounds 2.6bn) upgrade of the Panama canal goes ahead, it is expected to only accommodate 120,000-tonne boats.
However, analysts and politicians are divided over whether there is enough traffic for two major canals in the region, despite a great increase in world trade over the last decade.
The Nicaraguan president, Enrique Bolanos, said at the weekend that there is room for two major canals. "There's a lot of business to share. We know that for every 100 ships that come to the Americas, only seven use the Panama canal. If a Nicaraguan canal were built, it would bring an economic effervescence never seen before in central America," he said.
But a spokesman for the Panama Canal Authority, the semi-independent body that runs the Panama canal, said there was insufficient ship traffic to support both a widened Panama canal and a canal through Nicaragua. "If the widening goes forward, [the Nicaraguan project] is not feasible," he said. "Our analysis shows that if our project is approved, there would not be enough demand to pay for the two, and they would have to have a cost structure much higher than ours."
The project, which has been backed vigorously by Mr Bolanos, has been under active consideration for at least a decade, but has been held up by financial negotiations. Nicaragua, whose GDP is only 5% of the expected cost of the venture, is expected to have to link up with major global companies, including Chinese and Japanese banks which stand to gain the most by exporting more easily to the west.