News Home 16

News    Nr. 15

14 ES EN
JUL-27, 2013
Big Report - part 1
splash Canal Nicaragua
THE GRAND CANAL OF NICARAGUA:
DREAM OR REALITY?

Oil America, Inc.

For more than four centuries, explorers, scientists, politicians, tycoons and adventurers of all signs have dreamed of building a canal through Nicaragua that would unify the Pacific and Atlantic oceans, thus mounting an international emporium. The historical leader Augusto Cesar Sandino himself proposed in 1929 to reaffirm its construction with Latin American capital in the famous paper "Realization of the Supreme Plan according to Simon Bolivar".

Canal Nicaragua, HK Nicaragua Canal Development Investment Co. (HKND)

So far these ambitions have failed because of the grand challenge of breaking an artificial route of 250 km of length through dense jungle and mountains, cutting land, deepening river channels and crossing the great Lake Cocibolca, but overcoming quite a bit the vagaries of geopolitics and endless intrigue and international conspiracies related to the control of the seas and international trade.

Now, the dream comes back to the table, when President Ortega and Chinese billionaire Wang Jing, signed a memorandum of understanding that grants the company HK Nicaragua Canal Development Investment Co. (HKND), the rights for the development and the construction of the canal with the deepest draft worldwide between the Caribbean Sea and the Pacific, a construction which, according to informed sources conservatively would last more than 10 years in its execution and would cost the pittance of $ 30-40 - billion.

The announcement caused many reactions, from those who claim that this extensive investment will generate about U.S. $ 5-billion annual profit and tens of thousands of jobs, converting Nicaragua into the most prosperous country of Central America, to those who graded it "Chinese tale story" or warn of potential environmental hazards. What are the realities behind this crossfire? Let’s see:

A dream of almost 500 years

Nicaragua's history has been marked by the dream of building an inter-oceanic passage using Cocibolca Lake - the second largest in South America with more than 8-thousand km2 – and, initially they already ruled out the route, through the legendary River San Juan.

The first reference I know is the letter written in 1524 by Hernán Cortés to Charles V, where he says that those who would discover the route for passage through Central America "could be considered owner of the world" and that his possession "would be worth more than the conquest of Mexico".

In 1567, King Philip II instructed to study the first stroke of a canal across Nicaragua, but given little technical development in those days and the crisis of the Spanish Empire, this and other proposals failed to occur.

The dream continued to live with its ups and downs, but it became fashionable again back in 1850, with the so called "Gold Rush", which caused a stampede of "prospectors" and adventurers shouting "TO CALIFORNIA" rush by hundreds of thousands to exploit the Californian gold, causing the raise of transit and migration figures from coast to coast within USA.

It was then, and not by chance, when "The Commodore" Cornelius Vanderbilt, associated with another two "Tycoones" penetrates Nica ground with his American and Atlantic Pacific Ship Canal Company and instructs Colonel OW Childs, famous engineer who had enlarged the Erie Canal in New York, the first topographical survey to trace the path, inclusive orders the cleaning and cutting of 21 kilometers between the La Virgin and San Juan del Sur.

During the rest of the nineteenth and early twentieth century, all governments dreamed of building the Canal Nica. Wars, revolutions and even the invasion of "Filibuster" William Walker were related to the legendary canal. Walker even achieves to be implemented temporarily as "President" of Nicaragua and is recognized as such by the State Department under a plan to unify the Central American republics under his rule and of course build the canal.

Beginning the twentieth century, the facts seem to definitely favor the Nicaraguan route. The failed adventure of the French Canal through Panama puts the ball in the court of the new American power and Washington, the Isthmian Canal Commission of the United States, (1899-1902), better known as the Walker Commission, constituted by the then President McKinley, was betting everything to the Nicaragua route.

But the story takes an unexpected turn when McKinley was assassinated and his Vice President Theodore Roosevelt assumed the presidency. Shortly after settling himself in the presidential chair, by relying on an offer from the French company that underpins all development rights on the Panama Canal to sell their shares for U.S. $ 40-million, Roosevelt lobbies the members of the Walker Commission and convinces them to submit a supplementary report to the U.S. Congress, now unanimously favoring the Panama route.

It's up to Senator Hanna to make the presentation of the Walker Report. They say it was compelling, but not enough to achieve the required votes. The representative of the French Canal Company, Bunau Varilla, had to turn around the situation – according to the legend – by using the trick of sending a letter to each senator with a one cent Nica stamp that showed the famous Momotombo volcano in full eruption. The stamp clearly highlighted the differences between the two countries - one with volcanoes, earthquakes and the other comparatively stable. In June 19, 1902, the Senate vote favored the Panama Canal route with a difference of only eight votes.

Once the route was established, it was time to begin negotiations with Colombia. They started immediately between the Colombian Commissioner Herrán and U.S. Secretary of State Hay, resulting soon in the famous Hay-Herran Treaty, which granted the United States all the rights for a period of 100 years. However, Colombian’s public opinion condemns the Treaty and its Senate rejects it declaring it unconstitutional.

Eager to build the Panama Canal, Roosevelt overturns his incipient support for it, in spite of the incipient Panamanian independence movement, sending troops and four battleships. He would presume later: "I took the Isthmus, started the Canal and then had the Congress debate rather about me than about the Canal." It is very likely that the Panamanian independence movement would have succumbed, at least temporarily, without the American presence.

Panama declares its independence from Colombia on November 3, 1903, confirming the nefarious Treaty Hay-Bunau-Varilla on December 2 of that year. United States does the same on February 23, 1904. This treaty gives the United States the perpetual concession of the Canal, the development of an area of 10 miles wide - 5 miles to each end of the line of the Canal - on which it would execute its own sovereignty. Roosevelt's audacious move was successful for the United States, thus fading the dream of the Nicaraguan Canal by little more than a 100 years.

A Common Chinese

From where does Wang Jing come from? The audacious Chinese who commands the rich company that holds sovereign privilege and responsibility to build one of the largest engineering works so far in this century and which according to him could change the destiny of Sandino’s homeland.

According to his passport, Wang was born in Beijing in December 24, 1972. According to Xinwei Telecom Group’s website he became the head of the wireless communications company in 2010. On September 5, 2012, he achieves to sign a contract of 300-millons and the granting of a bandwidth for mobile telephony with the Nicaraguan Institute for Telecommunications and Posts (TELCOR). Mr. Wang could not be happier, however, for many Nicaraguans, remains unknown.

"Nobody knows anything about him, --says Michael Forsythe to the BBC, Bloomberg correspondent in Beijing and a connoisseur of the intricacies of business in China.

Wang says he has no connections with the government of his country and he presents himself "as a student of traditional Chinese medicine in Beijing." Given the insistent questions about who he is, Wang declared during a press conference: "I am an ordinary Chinese. I could not be a more common and ordinary person".

Common and ordinary? Definitely Not. According to Bloomberg Billionaires Index, Wang Jing is just 41 years old and among his many assets is the telecommunication company Beijing Xinwei Telecom Technology Co., where he declared a personal stake of U.S. $ 1.100-million. He also appears on the board of multiple companies, several of them already inactive.

Regarding the Nicaragua Canal project, Wang is the only visible representative of the concessionaire, HKND, in addition to its spokesman Ronald. MacLean-Abaroa, former mayor of La Paz - Bolivia. And many wonder: What does a telecommunications tycoon being involved as a builder of transoceanic channels?

"Actually, who is Wang Jing is not an important question - explains correctly Raymond Li, head of BBC’s Chinese service--. What matters is who is behind him. That is the question that many are asking now. Xinwei Telecom is said to have close ties with the Chinese government. In fact, on their website you can see pictures of leaders of this Asian country, including its president Xi Jinping and Premier Li Keqiang visiting their headquarters.”

"But most important - added the Chinese correspondent for the BBC - is the connection of Xinwei, since it produces wireless equipment, in conjunction with the state-owned telecommunications giant Datang and this is in turn one of its major shareholders".

Just a few months ago - in September - Datang went on sale for Xinwei shares mounting to U.S. $ 25.8-million, operation that allows to extrapolate a revaluation of the company to nearly 3-billion Dollars. A financial engineering maneuver, that, according to Li, demonstrates how far the Chinese government supports Xinwei and therefore supports the project of the canal in Nicaragua.

Summarizing his intentions, Wang Jing told the Wall Street Journal in an exclusive interview "my project is a response to the 100 years of dreams of the Nicaraguan people ... (I am) convinced that the world would need a canal wider and deeper than the one of Panama."

The Canal Runs on Fast Track - It has a Sinomotor

It renews the illusion of a Nica Canal. The mega project brings renewed hope, but this time from the other side of the world, the legendary China, builder of the ancient Great Wall and the modern gigantic Three Gorges Dam.

In the United States, absolute owner of the Panama Canal until 1999, the matter has caused bad flavor in the Status Quo. "Wang's company has no experience in the construction of canals" protests the spokesman of status Andres Oppenheimer from the Miami Herald. Many denounce "a monumental transfer of Nicaraguan sovereignty which will convert Wang practically into the owner of the country", forgetting when Roosevelt ripped off from Panama a grant "in perpetuity". Other critics say that Ortega had to "call a referendum and ask if the project is legal and environmentally healthy."

Like the Panama Canal was a consequence of American power and its expansionist policies at the beginning of the twentieth century, the Nicaragua project reflects China's growing influence and especially its financial and commercial muscle, seeking out to the seas.

HKND spokesman Ronald MacLean-Abaroa, former mayor of La Paz – Bolivia, says that according to his group’s opinion, shipping will suffer a jump and super-vessels will be needed, basing his projections for the future success of a canal in Nicaragua in Revolution of U.S. oil shales, and the promise that with new technologies they will extract billions of barrels of oil and gas equivalent. In an interview with Reuters he abounds "this project can be done now and only now" thanks to new technologies that allow large amounts of fuel to be extracted that previously was not available in U.S. territory. "Three years ago (this reality) did not exist and its prompt fulfillment would create a boom not only energy wise, but also a growth in exports of iron ore, coal, and grain, which will open market for an additional canal for new and larger ships.

Critics to the project wanted to question its feasibility based on the lack of interest that "the market" has showen and some disparagingly has called it "a Chinese tall story", but obviously there is more to it than that. This is not the first time that by a move of a Chinese company they would gain control over the means of communication between the Atlantic and the Pacific. A few years ago, Panama Ports Company (PPC), a company from Hong Kong owned by one of the wealthiest businessmen in China, Li Ka Shing, wins a bidding process, displacing U.S. interests and takes over, despite of theirs and the U.S. Embassy´s protest, the administration of the ports of Cristobal and Balboa, to the extremes of the Panama Canal, for a twenty-five-year term, renewable.

The Chines strategy of expansion in Latin America is not achieved with battleships and guns. Their bullets, as announced by President Xi Jinping during his recently visit in Mexico, are the "more than $ 500-billion" that his country will invest in the next five years and its tactics of offering themselves as a partner and ally, embodied in another sentence of Xi in the Aztec country "the more Latin America develops, the better for China." Seen this way the move of HKND in Nicaragua, it seems more like a new Chinese chess opening rather than a Chinese tale story. Time will tell if the grand Nicaraguan dream achieves to materialize …

NOTE: IN A COMMING EDITION WE WILL ANALYZE THE COMPETITIVENESS OF THE PROJECT OF NICARAGUA0S GRAND CANAL, ITS MAIN FINANCIAL ASPECTS AND POTENTIAL ENVIRONMENTAL IMPACTS.