Business View Caribbean | May 2016

14 May 2016 - Business View Caribbean Business View Caribbean - May 2016 15 Opening Lines American commodities competitively priced, and the decrease in travel times would decrease green- house gas emissions. Moreover, HKND promises to use some of the revenue generated by the canal, which would be considerable, to fund other environ- mentally conscious measures such as reforestation efforts and rainforest conservation in Nicaragua. Bill Wild said HKND Group plans “a massive amount of reforestation generally throughout the corridor of the canal.” The Environmental Impact Assessment prepared by ERM also highlighted the need for re- search and spending on reforestation and conserva- tion in the area. Nicaragua has been facing defor- estation and environmental degradation for years, and resources from this engineering project could be used to slow or stop this. The Nicaraguan government forecasts that the ca- nal project would create 50,000 jobs, and its upkeep would support an even larger number of them, as well as provide funds for infrastructure and commu- nity improvement. Ownership of the canal would also transfer in stages from the Chinese company to the government of Nicaragua. Upon completion of the canal, the government of Nicaragua would re- ceive a one percent stake in the consortium, which would increase by ten percent each decade. The fees collected from ships crossing through the ca- nal (like those exacted from ships crossing through Panama’s canal) could be used for social projects to help the Nicaraguan people. Yet these positive messages come with cave- ats. While the Nicaragua canal would allow ships too large for the expanded Panama Canal to pass through, these ships are a minority. Few ports are even capable of hosting the behemoths. This small minority of ships does not justify the production of a canal to accommodate them and their tolls alone could not provide a return on HKND’s investment. Fees for using the new canal at all would have to be low in order to draw sea traffic from the Panama Ca- nal yet would still have to be high enough to return an investment. While money from the canal could benefit the Ni- caraguan people, the government would only con- trol 50 percent of the canal and HKND has exacted other tax concessions from the government even if the canal is never built. The cost to the Nicaraguan people and environment would be immediate but the reward would be slow in coming. Opinions on the canal vary widely depending on the source. Official polls carried out by the Nicaraguan government say the canal had an 81 percent approv- al rate while a Cid Gallup poll reported that 34 per- cent of respondents thought the canal project was pure propaganda. This debate between the rural en- vironmental interests and the government business partnership (which was hardly settled when the ca- nal project was approved in December of 2014) has been granted respite. Although the official reason for the delay in the con- struction was the forthcoming environmental im- pact assessment, the enigmatic Chinese billionaire behind the canal project, Wang Jing, lost 85 per- cent of his ten billion USD personal fortune when the Chinese stock market crashed in November and December of 2015. He had promised to provide the initial seed money for the project from his own con- siderable wealth and make up the deficit by assem- bling a cohort of investors who could help bring the project to fruition. Bloomberg Business quoted an interview with HKND vice president K.W. Pang, who countered these concerns: “Many businessmen from Latin America, China and Europe have come to talk with us,” Pang said. “The project’s financing does not de- pend on the state of the stock market in China. It is an international project. Funding will come from many countries and many investment sectors.” The HKND is not being funded by either the Chinese Export Import Bank or any other state source direct- ly, meaning that the project cannot necessarily rely on the Chinese government to replace Wang Jing’s initial seed money. Although China has paid for considerable infrastruc- ture projects in the Western Hemisphere over the last decade, Nicaragua has kept up strong relations with Taiwan, which could complicate its relationship with Beijing. The HKND has maintained that the project will still move forward, but there is little evi- dence to support this claim besides two ditches dug at the mouth of the Brito River. At present, the future of the canal project is uncer- tain. On March 15, 20,000 people signed a petition asking the Nicaraguan legislature to repeal the law that allows the canal project. Those who fear the environmental impact of the canal are still worried that when the project resumes it will exact a terrible toll on Nicaragua’s environment. However, the Nica- raguan environment is deteriorating anyway and the canal could control the inevitable. Those who want the canal to succeed are anxious because they need a return on their investment, and President Ortega has promised economic relief to a country that has struggled to get back on its feet. Yet the economic viability of this canal project remains in question. Both Wang Jing and President Ortega stand to lose if the project is called off, given the huge financial losses and the humiliation of failure. Much like Shakespeare’s Macbeth, HKND Group and President Ortega seem to have reached a point in which to progress or retreat would be equally painful. Nicaragua needs to make a change to im- prove its economy and protect its environment; but it remains to be seen if the canal project will be that change.