The Nicaraguan Canal: digging in the dark

Dany and Wang and canal makes three

Dany and Wang and canal makes three

The Council of Private Enterprise, known as COSEP, organized a public meeting with HKND (Hong Kong Nicaraguan Development), the Chinese company that won a contract over a year ago to build an interoceanic canal through Nicaragua. The meeting was supposed to provide business organizations and chambers of commerce with specific information about the current status of this megaproject and the feasibility and environmental studies related to it.

Unfortunately, the presentations HKND and Environmental Resource Management ERM were steeped in generalities and even when they agreed to answer some questions, vagueness and evasion seemed to be the order of the day.

For example, when I asked the HKND representative to name any potential international investors in the canal and explain why, despite the fact that in October last year, Wang Jing said he would present the investors to the public in December; no information of the sort had been released so far. The answers he did provide bordered on the bizarre. He said it was not possible to disclose the financial contributions or the identity or origin of the investors because of the “confidential” nature of “trade secrets” and the nature of the private entities that are listed on the Stock Exchange (!)

All of the secrecy around the financing for this 50 billion dollar project contradicts the promise of transparency initially made by the authorities. It is now impossible to know whether it is an international project, or one that will only be funded by Chinese capital and Chinese companies. The difference between a global project, involving capital and diverse foreign interests and an exclusively Chinese project would be substantive. No one doubts China has the economic resources and the ability to make massive infrastructure projects such as the canal through Nicaragua, but if this is a project whose viability depends entirely on the political will of the state of the Popular Republic of China, the geopolitical, environmental and institutional implications for our country are totally different. If that is the case, as the secretive tone seems to indicate, then this is a project that will obey and serve China’s interest “regardless”, which requires special measures to safeguard the state and national interests of Nicaragua.

This concession, granted in haste to HKND by the unilateral decision of President Ortega, can not only harm the sovereignty and national interests of the country, but it could jeopardize the future for generations to come.

In a country whose democratic institutions have been demolished by authoritarianism, the unlimited power exercised by Ortega has produced a concession deal that essentially grants an enclave in our territory to a private company or perhaps even to a foreign power.

We are already suffering the consequences of the opaque relationships between Ortega and HKND. The first is the lack of response to common sense questions that different sectors of the country have asked HKND, through a series of national forums organized by the Nicaraguan Academy of Sciences:

  • What is the implementation schedule and when will the feasibility studies including the technical, economic and environmental impact of the canal be finished and disclosed?
  • Will these studies, paid by HKND, be subjected to the scrutiny of independent national and international experts?
  • If these studies are still ongoing, and therefore the viability of the project and its environmental impact is still unknown, how can they affirm that the construction of the canal will start in December?
  • What will be the environmental impact of dredging Lake Nicaragua and how will its excavation and future dredging affect the country’s most important strategic water resources?
  • Who will oversee our national interests given the fact that the Ortega-created Grand Canal Authority has demonstrated little authority and no autonomy?

The second ripple effect has to do with new twists that bend the rules of the game of the canal concession even before its construction starts. Under the absolute discretion granted by the government to HKND, the company is proposing new business initiatives called “sub-projects of the canal” which have nothing to do with the actual construction of the canal. In the new design, the oil pipeline or railroad lines touted as part of the project when it was first announced have mysteriously disappeared. Instead, HKND revealed a gigantic tourist project announced as the “San Lorenzo vacation resort”, located more than 10 kilometers south of Brito, i.e., a considerable distance from the canal route. This area includes seven miles of beaches, – Ocotal, Majagual Pitahayas and Maderas- a stone’s throw from San Juan del Sur. These lands comprise hundreds of properties owned by Nicaraguans and foreigners and a dozen hotels, including the world-renown Eco touristic Morgan’s Rock. Why would HKND and its local partners select that area and not one further south or further north from Brito, to build a resort? It’s a question that can only be answered based on commercial interests and projected profits. There is no doubt, however, that attempting to carry on business deals under the extraordinary powers bestowed by the canal law threatens to undermine property rights throughout the country.

The voracity that underpins the Wang Ortega-law had already been pointed out by legal experts when the concession was granted, but no one imagined it would show its face so early and with such impudence. During the COSEP-HKND conference I had the opportunity to ask the official spokesperson if the expropriation clause referred to in the canal law would also apply to the “tourist projects” and other business ventures.

It was a timely opportunity for the Chinese company to clarify its intentions and its interpretation of a law custom-made for them. The response of Wang Jing´s representative was to keep silent under the watchful eye of “the investment promoter” Laureano Ortega Murillo, the President’s son and official business liaison with Wang Jing. A silence that is a more clear alarm bell for domestic and foreign investors.

This article was originally published in Confidencial here, and is republished with permission in Nicaragua Dispatch.

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