Business View Caribbean | May 2016

12 May 2016 - Business View Caribbean Business View Caribbean - May 2016 13 Opening Lines The Canal Stuck in a Quagmire By Edwin Nieves - Research Associate at the Council on Hemispheric Affairs On July 7, 2014, the Hong Kong Nicaragua Develop- ment Group (HKND) announced the approval of a plan to build a canal linking the Pacific and Atlantic Oceans through Nicaragua; roughly 100 years after the United States completed the Panama Canal. The Nicaraguan enterprise would be the largest civil en- gineering feat in human history: wider, deeper, and longer than its Panamanian counterpart. “There has been no civil engineering project of this magnitude – ever,” claims Bill Wild, chief project ad- viser to HKND Group. This ambitious plan was pro- jected to cost an estimated US$50 billion and take five years to build. The HKND broke ground to much fanfare in December 2014 near the mouth of the Bri- to River in western Nicaragua, with a plan to finish the project in 2020. After over a year of delays, the contentious canal project will resume in August of 2016 with an un- specified completion date. The HKND Group of- ficially claimed that they were waiting for a critical environmental impact report before they undertook construction. The British Environmental Resource Management (ERM) Ltd., the world’s leading sus- tainability consultancy, was contracted by HKND to prepare this study in accordance with Nicaraguan law. The report stated that the Nicaragua Canal’s commercial potential is considerable, but that its environmental impact would also be significant. The fears of rural Nicaraguans, indigenous peoples, and the environmentally conscious were validated by the environmental impact assessment. The ca- nal’s construction and the supporting infrastructure will destroy almost 1 million of Nicaragua’s 7.9 mil- lion acres of rainforest and wetlands. The canal will also cross through Lake Nicaragua, which provides fresh drinking water for a majority of Nicaraguans. Furthermore, Nicaragua is situated in the middle of a hurricane belt, meaning that the Nicaragua Canal will be exposed to physical stresses beyond those that currently afflict the Panama Canal. Bob Stallard, a hydrology expert with the US Geo- logical Survey, who has studied the effect of storms on the Panama Canal for 30 years told Yale Environ- ment 360 that “Nicaragua has experienced at least four Class 4 or greater hurricanes since 1855. The cost of fixing damage [to the canal] could be as much as building the thing in the first place.” Hur- ricane rains and winds could cause floods and land- slides, which could break the canal’s locks and dam- age local towns and infrastructure. These environmental consequences are compound- ed by potential human impact. This project potential- ly would displace a minimum of 30,000 Nicaraguans and an unknown number of indigenous peoples, almost surely extinguishing their traditional way of life. The canal project would certainly cut through the lands of the Rama and Kriol peoples, whose lands are still inaccessible by road. Nicaraguan farmers who live in the region surround- ing Lake Nicaragua and depend on the lake for their survival also protest the canal project, claiming the former revolutionary-turned politician President Ortega betrayed them and sold their country to a foreign company. They worry (not without reason) that the canal will pollute the lake and make it impos- sible for them to stay in their ancestral homes. This concern is echoed in many small towns throughout the country. Experts told the New York Times “that Mr. Wang will have to pay only the assessed value, or about five percent of the market value, for any lands he takes”. While the Times also reports that Mr. K.W. Pang, executive vice president of HKND, said that HKND will pay market value for the land it wants even though it is not obligated to. This situation is complicated further by the status of indigenous peoples who (according to the Ni- caraguan Constitution of 1987) own their land and are autonomous. It is unclear how these peoples would be paid for their land how its value would even be determined. Speculation runs rampant as Nicaraguan property owners in the area report harsh crackdowns by the Nicaraguan police. These events reinforce the fears they have for the future of their security of their homes and livelihoods. However, HKND and the Nicaraguan government demonstrate optimism that these effects can be off- set by the benefits of the canal. Some of the exports from Latin America to China are commodities that are transferred in ships too large for the pre-expan- sion Panama Canal. According to the HKND’s own website, many Brazilian ships and other commod- ity exports from the eastern side of Latin America would benefit from the Nicaraguan Canal because they would no longer have to circle the Cape Horn. The size of the Nicaragua Canal would allow tanker ships too large for the Panama Canal to pass, thereby cutting costs and carbon emissions from the mam- moth ships. The decrease in costs would keep Latin