Nicaragua announces start of China-backed canal to rival Panama

Monday, 5 January 2015 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Nicaragua has announced the start of work on a $ 50 billion shipping canal, an infrastructure project backed by China that aims to rival Panama’s waterway and revitalise the economy of the second-poorest country in the Americas. The groundbreaking was largely symbolic, as work began on a road designed to accommodate machinery needed to build a port for the canal on the Central American country’s Pacific coast.

HK Nicaragua Canal Development Investment Co Ltd (HKND Group) Chairman Wang Jing speaks during the start of the first works of the Interoceanic Grand Canal in Brito town December 22, 2014. Nicaragua’s government says the proposed 172-mile (278-km) canal, due to be operational by around 2020, would raise annual economic growth to more than 10%. The canal could also give China a major foothold in Central America, a region long dominated by the United States, which completed the Panama Canal a century ago. Construction of the new waterway will be run by Hong Kong-based HK Nicaragua Canal Development Investment Co Ltd (HKND Group), which is controlled by Wang Jing, a little-known Chinese telecom mogul well connected to China’s political elite. Flanked by Nicaraguan President Daniel Ortega, who is a former Marxist guerrilla leader, Wang Jing said the tender for the preliminary design of the project would be offered by the end of the first quarter of 2015, by which time an environmental impact study would also be finished. By the end of the third quarter, excavation work would begin, with a tender for the design of the locks due by the end of the year, he said.

More than a year since it was first announced, the project faces widespread scepticism, with questions still open about who will provide financing, how seriously it will affect Lake Nicaragua and how much land will be expropriated for it. “Given how much this will cost, it’s hard to take a stance on whether it will happen or not until there is a signal whether that money is available or not,” said Greg Miller at consultancy IHS Maritime. In the Americas, only Haiti is poorer than Nicaragua. Earlier, Nicaraguan presidential spokesman Paul Oquist said feasibility studies, including a McKinsey report that experts say will define interest in financing the canal, had been delayed by changes to the route and would be ready by April. Oquist said the ‘core financing’ would come from public and private Chinese money, without giving a percentage. But he added that Nicaragua is seeking international funding and rejected the idea that China will bankroll the project worth roughly four times Nicaraguan gross domestic product.

Panama Canal consortium claims further $ 740 m in cost overruns

Reuters: The consortium working on the extensive Panama Canal expansion has submitted two new claims for cost overruns of almost $ 740 million, the canal administrator said recently. A dispute between the canal and the consortium over cost overruns temporarily halted work on the expansion earlier this year and arguments over the project are now being heard in an arbitration court in Miami. The consortium, Grupo Unidos por el Canal, formed by Spain’s Sacyr, Italy’s Salini Impregilo, Belgium’s Jan de Nul as well as the Panamanian company CUSA, has now presented a total of about $ 2.3 billion in claims for overruns, said Panama Canal Authority administrator Jorge Quijano. “We’re not taking these claims at face value,” said Quijano. “We’ve received claims (previously) that, upon review by a third party, have ended in nothing.” Hold-ups on the engineering project, which centres on the construction of a third set of locks, have left trading nations waiting anxiously to start moving a new generation of large container ships and liquefied gas tankers along the 50-mile shortcut between the Atlantic and Pacific oceans. The section to build the new locks was originally supposed to cost $ 3.2 billion. Quijano said he still expects the new locks to be delivered in January 2016 and for the expanded canal to begin operating between March and April that year.