Nicaragua Canal Details

˙ China & Latin America

A committee in Nicaragua’s General Assembly voted to approve a 50-year concession (with the possibility of an additional 50 years) for a Chinese firm to build a Panama Canal alternative in Nicaragua. The country will now begin a feasibility study, but canal-related progress will depend to a considerable extent on Nicaragua’s ability to attract investors.

On Wednesday, the Nicaraguan president evidently met with Ambassadors from Brazil, Canada, Switzerland, Canada, Kuwait and Saudi Arabia to pitch the canal project. Some experts say, however, that returns on investment won’t be evident for years, and that demand is insufficient to support a project of this scale. Ortega, however, appears set on pushing the project forward. The process began in earnest last July, when Nicaragua’s parliament approved a canal law (law number 800), which states that the Nicaraguan State will receive 51 percent of net benefits from the canal, with the remaining 49 percent going to investors (governments, organizations or legal persons).
  
In September, Nicaraguan officials signed a memorandum of understanding with Wang Jing, chairman of Xinwei Telecom and president of the newly established Hong Kong firm, HK Nicaragua Canal Development Investment Co. Ltd. Just last week, a three-party agreement was signed between “la Autoridad” (de gran canal interoceanico de Nicaragua), EDGI (Empresa Desarrolladora de Grandes Infraestructuras) and HKC (HK Nicaragua Canal Development Investment Co. Ltd).  Wang Jing is evidently the head of both EDGI, which will presumably be doing canal construction, and HKC (see document signatures).
 
Experts say the canal could take eleven years to finish, cost about $40 billion, and require digging of about 130 miles (200 kilometers) of waterway, presumably through Lake Nicaragua. Of concern is the environmental impact of a project of this sort, and the urgency with which the project is being pushed forward. An environmental impact assessment is being conducted by three Dutch firms according to a Chinese source. And an outline for environmental and feasibility studies was supposed to have been presented this week.
 
Very little is known as of yet about Wang Jing. His telecommunications firm, Xinwei, was founded in November 1995 with registered capital of RMB 2 billion, according to the company’s web site . It has been active in wireless communications technologies for the past 18 years. Also according the web site, Beijing Xinwei was awarded the First Prize for National Scientific and Technological Progress, Gold Prize for China Patents and Major Technological Inventions in Information Industry and other outstanding honors and was among the first batch of innovative enterprises of the state. In addition to contracts in Panama and Brazil, Xinwei landed a $300 million deal in Nicaragua last September. Xinwei is also linked to the company China Great Wall Industry, which is reportedly in the process of building a $244 million satellite for the Nicaraguan government. Wang Jing is listed as head of twelve other existing or dissolved Hong Kong companies.
 
Judging from the high-level visits Xinwei Group receives (see photo wall: http://www.xinwei.com.cn/zjxw.aspx?action=ldgh), it would appear that Wang Jing fairly strong political connections. Chinese netizens have mentioned  that Wang Jing (王靖) is the grandson of Wang Zheng (王震), a former Chinese vice-president  (1988-1993), but this does not appear to be the case.
  
Despite Wang’s assumed connections to the Chinese government, involvement on the part of the HK Nicaragua Canal Development Investment Co. in the Nicaragua canal project is not the same as involvement on the part of the Chinese government. Most of China’s large scale, multi-billion dollar infrastructure projects in Latin America are completed with funding from China’s major policy banks — China Development Bank or China Ex-Im bank — which generally then partner with a Chinese construction company. In this case, the canal project will be funded not by Chinese policy bank commercial or concessional lending, but by investment from different governments, organizations, and individuals. The Empresa Desarrolladora de Grandes Infraestructuras is not one of the major Chinese construction firms that are typically affiliated with major China-funded infrastructure projects in the region. It was created by HK Nicaragua Canal Development Investment Co. in order to be able to operate in Nicaragua.

The extent to which this project will increase China’s influence in the region and on global trade routes is unclear. This would depend on a wide variety of factors, including HKC’s connections to the Chinese government and who else, if anyone, decides to invest in the project. The Chinese government and its representatives are mum the canal developments for the time being.

Timeline and documents:
 
Doc Date issued/signed Note Link
Ley 800 07/12 Authorizes the formation of the “Autoridad” (de Gran canal interoceanico de Nicaragua) pdf
Memorandum of Understanding 09/12 MOU pdf
Deed of Cooperation 10/12 Covenants, responsibilities, equity and other terms pdf
Acuerdo Marco de Implementación 06/13 The 120-pg official proposal/agreement pdf1 pdf2