One of the most extraordinary stories of the past decade largely overlooked by the U.S. media is how Central and Latin America have quietly escaped U.S. control since 9-11, as Washington focused on its Global War on Terror.
GWOT diverted Washington attention long enough that progressive governments established themselves throughout the southern Western hemisphere, from Venezuela through Brazil, Paraguay and Bolivia, which were far less inclined than previous administrations to listen to advice from their giant “el Norte” neighbor.
A crucial element in this process has been Central and Latin America expanding their trading opportunities with states frowned upon by Washington, from Iran to China.
Now, in the latest sign that Washington’s sway over the region is diminishing still further, Nicaragua has announced that it will soon begin construction of a canal to compete directly with the Panama Canal further south, to be financed by – China.
As with the Three Gorges Dam, Beijing is not thinking small, as the proposed canal could take 11 years to build, cost $40 billion and require digging roughly 130 miles of channel. The Panama Canal, in contrast, is 48 miles long.
The ruling Sandinista National Liberation Front, which has 63 of the 92 Parliamentary seats, has introduced legislation to award the project to HK Nicaragua Canal Development Investment Co. Ltd. It is an extraordinary proposal for Central America’s poorest nation, which does not even yet have a highway connecting its Atlantic and Pacific coasts. Nicaraguan President Daniel Ortega hope to gain final approval by 14 June.
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Planning for the project began in July 2012, when the Nicaraguan government announced the approval of a law for the construction of the "Great Inter-Oceanic Nicaragua Waterway Canal," passing legislation that authorized the government to create a company whose state share would be 51 percent, while the remaining 49 percent would be acquired by a strategic partner. Daniel Ortega presidential adviser Paul Osquit, said that it was a project intended to send "a clear signal to the countries of the world" interested in investing in the mega project, which included Venezuela, Brazil, China, Japan, South Korea and Russia.
Notice that the U.S. is pointedly not on the list.
It will not be an insignificant undertaking, as the canal’s proposed locks will require 1.7 billion gallons of water per day, given that the channel will be 200 feet deep in places.
Furthermore, Nicaragua's canal would have to be more than three times longer than the Panama Canal. A major advantage of the route however is that the massive Lake Nicaragua is separated from the Pacific only by a thin strip of land; accordingly, large oceangoing freighters could travel about 50 miles on Lake Nicaragua's waters before going through a pair of locks, and into a waterway dug across the waist of the country to the Atlantic coast lowlands.
Nicaraguan advocates say that the channel is needed, arguing that inter-oceanic maritime freight traffic demand will outstrip the capacity of even the expanded Panama Canal by more than 300 percent within 123 years, and the canal’s construction create 40,000 construction jobs. Better yet, is could double the per-capita GDP.
The Panama Canal is currently restricted to tankers of up to 65,000 tons, known as “Panamax.” Passage restrictions now frequently produce lengthy queues of up to 100 merchantmen outside the canal's Atlantic and Pacific entrances waiting to make the nine-hour passage. Since 1995 the volume of container shipping has tripled and since 2001 risen more than 50 percent. Maritime analysts now estimate that containerized cargo accounts for over 70 percent of international maritime trade, producing in 2006 almost 346,000 container shipments daily, a figure estimated by 2014 to exceed 600,000. About two-thirds of the cargo transiting the channel is headed to or from the U.S., with China Panama Canal's second-largest user.
Since 2007 the waterway has been undergoing a major $5.25 billion expansion, with construction of a third lane of locks to augment the current two sets, that will double the capacity of the Panama Canal to handle 600 million tons annually, with completion scheduled for 2013.
As for the new channel and its Asian constructors, the reality is that the U.S. retains an overwhelming preponderance of regional military and naval power in the region and asserts its ability and right to intervene if it feels its interests are threatened, as emphasized in 1989, when Washington sent 27,000 troops into Panama to arrest president General Manuel Noriega after two U.S. grand juries indicted him for racketeering, drug trafficking and money-laundering. Last but hardly least, U.S. warships have retained their historic right of precedence of passage in time of war. In 2008 Washington re-established its Fourth Fleet, traditionally responsible for Central and Latin American waters, which had been moribund since 1950.
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What’s in it for Hong Kong based HK Nicaragua Canal Development Investment Co. Ltd.?
Niacaragua intends to grant the Chinese company a concession for 100 years.
Not everyone in Managua is happy with the project. Opposition congressman Luis Callejas told reporters, "I do not understand what the rush is. It's such a sensitive topic that the population should be consulted."
How Washington will react to the new canal remains to be seen, but for the penny-pinching maritime shipping, shaving 100s of miles off transit routes will undoubtedly been seen as a godsend.
And who knows, if the U.S. begins LNG shipments from its East Coast to Asian markets, some U.S. energy firms may come to embrace it as well.
And if there’s trouble well, there’s always the Fourth Fleet.
By. John C.K. Daly of Oilprice.com