While the canal would likely boost commercial activity and revenue in the region, the project carries strong economic and environmental risks.
Attempts in the past have made the Nicaragua canal project victim of the limitations of technology, challenging terrain, economic instability, and political resistance.
On December 22, 2014, Nicaraguan President Daniel Ortega and Chinese entrepreneur Wang Jing negotiated an agreement to begin construction of a state-of-the-art canal that would have the capacity to accommodate a new generation of oil tankers and mega-size container ships that are too big to cross the Panama Canal.
The Nicaragua canal will cross Lake Nicaragua, the second largest lake in Latin America, and cut the country in two, to connect the Caribbean Sea and the Atlantic Ocean with the Pacific. At 173 miles, the canal will be about three times the length than the Panama Canal.
The projected total cost is 50 billion U.S. dollars, but is likely to increase. The project is more than just a canal as it will include other developments: an airport, highways, a free trade zone, resorts, and two ports — one on the Pacific and the other on the Caribbean Sea.
The canal project is forecasted to boost regional transshipment, foreign investment, and maritime initiatives in the Caribbean. Once completed, it is estimated that 5% of the world’s maritime trade will pass through the canal.
Geopolitically, the project is a risk that could lead to a diplomatic conflict between China and the United States over Chinese initiatives aimed to increase its economic and investment influence in Latin America.
Although the Chinese government denies having any direct public involvement with the project, China is interested and will wait to see how far the project progress before deciding on a role, if any, to jump on.
Lack of transparency increases environmental concerns
Nicaraguans, as well as local and international scientists, believe the canal will create an environmental catastrophe, threatening many surrounding ecosystems.
Victor Campos, director of the Humboldt Center, a Nicaraguan environmental think-tank in Managua, raised concerns about the lack of transparency and the absence of inclusive environmental impact analyses and economic likelihood studies.
“We have only partial and incomplete information,” Campos stated, “even though the proposed canal route would bring incredible consequences.”
Biologists Axel Meyer and Jorge A. Huete-Perez argue that Lake Nicaragua, which supplies an estimated 200,000 citizens with drinking water, runs the risk of becoming contaminated by dredging and then later by shipment traffic.
The canal is likely to bring salt water and invasive species to the freshwater lake, threatening native ecosystems.
Changes in water quality, transparency, and temperature may cause the seaflower ecosystem to “collapse,” according to Francisco Arias Isaza, director of Invemar, an oceanographic research agency funded by the Colombian government.
Isaza added, “a new canal of the magnitude they are talking about would funnel huge cargo ships to the area, and that worries us.”
Furthermore, scientists also worry about the impact the environment itself could have on the canal’s infrastructure. Nicaragua is in fact home to frequent seismic and volcanic activity.
Many observers also question whether the canal project makes economic sense, given that the Panama Canal is undergoing a $5.25 billion expansion that would enable it to accommodate more large ships — a key target market of the Nicaraguan venture.