Nicaragua Proposes the Inter-Oceanic Canal

Sources: The Guardian, $20 Billion and Ten Years to Build: A Giant Rival for Panama Canal; BBC, Nicaragua Plans Rival Canal Route; Associated Press, Nicaraguan President Proposes Canal to Complement Panama.

During a meeting of more than thirty international leaders, on October 2 Nicaraguan President Enrique Bolanos began to pitch the country’s dream—the Great Inter-Oceanic Nicaragua Canal. Lobbying for international support, Bolanos proposed the creation of a canal similar to that of Panama in hopes of creating a more efficient global shipping system and providing a much-needed boost to the Nicaraguan economy. This proposal is not new, although all past attempts to build have been scuttled by financial troubles. Bolanos anticipates that the canal will take more than a decade to construct and may cost over $18 billion, money that the country will obtain by allowing foreign investors (foreign nations) to purchase shares.

Importantly, however, Panama is poised to vote on whether or not its canal will be widened later this month. The present canal is too small to accommodate modern vessels and there are often long lines of ships waiting to pass between the Atlantic and Pacific Ocean. Bolanos believes that even with the renovations of the Panama Canal, it will be too small to handle the 5% of global-trade traffic that uses the waterway. As he explained, “[t]he galloping increase in world business demands another canal in addition to a widened Panama Canal.” In other words, the President does not see the Nicaraguan canal as competing with Panama, but rather as a complementary route.

If Nicaragua is able obtain support for this initiative it could have a dramatic impact on the second poorest nation in Latin America. Currently, than 75% of Nicaraguans live on less than $2 a day, and the unemployment rate hovers around 50%. See Inter Press Service News Agency, It's Always Greener on the Other Side of the Border. Building a canal through the country could create over 20,000 jobs, greatly increase investment in the area, and provide the government will badly needed income. For example, the Panama Canal currently provides Panama with over 8% of its revenue. The financial benefits do not come with out a cost, however, and environmentalists have issued warnings about the impact that destroying large swaths of forest in order to build the canal could have. They also warn of the dangers of damaging the marine life.

Questions:

(1) If Nicaragua's canal is to be built, the country must look for international financial support. It is anticipated that countries with a great need for sea traffic will be most willing to invest. Does the fact that foreign nations may own a controlling share in a canal so close to the U.S. border pose national security concerns? If so, what might the U.S. do in response?

(2) Is it realistic to believe that two canals are needed? Could Nicaragua's dream simply be a way to move the country onto more stable economic ground at the expense of Panama?