Nicaragua’s “pharaonic” canal project

Nicaragua may be a small and very poor country but its president, Daniel Ortega, certainly thinks big.

His latest proposal is to build a canal that would be similar to Panama’s at an estimated cost of $30bn – about four times as much as Nicaragua’s gross domestic product. The project is awaiting appraisal by the nation’s legislature.

Neighbouring Costa Rica is showing concern. At least one potential route for the canal would follow the course of the San Juan river, whose sovereignty is disputed between Nicaragua and Costa Rica in a case being heard by the International Court of The Hague. [update: as pointed out in the comments below, the San Juan river is not in dispute - it is within Nicaraguan territory. However, the two countries have been in a dispute over islands in the mouth of the river - the International Court of Justice decision is here.]

Costa Rican officials have described the project as “pharaonic”. There are no pharaohs in Nicaragua but Ortega’s project does involve the excavation of enough earth to fill the Suez Canal three times over, on top of what is being dug up in the current expansion of the Panama Canal.

At $5.25bn, of course, the expansion of the Panama Canal would be a mere stripling compared with Ortega’s scheme.

Nicaragua is second only to Haiti as the poorest country in the Americas. Clearly, if the canal is to stand a chance, it will need very substantial foreign financial backing.

Backing there will be, says Edén Pastora who, like Ortega, was a comandante of the 1979 Nicaraguan Revolution. “There have been talks with Japan, China, Russia, Brazil and South Korea, and everyone’s agreed the canal’s a great idea,” said Ortega.

The comandantes do have a track record in foreign investment. Last year Nicaragua attracted almost $1bn of foreign direct investment – more, in proportion to the size of its economy, than any other country in Latin America.

But even if the canal is a great idea, its proponents have yet to prove there is a market for it, says one person in a company that might be contracted for a feasibility study. In the current international economic climate, even the most optimistic projection for what Ortega describes as a “complement” to the Panama Canal is unlikely to hold water, so to speak.

Yet the concept of a Nicaraguan canal to link the Atlantic and Pacific oceans is centuries-old. Indeed, it was pipped only at the post when the US Congress opted for the Panama route because Panama’s supporters planted a story in the New York Sun that falsely reported an eruption of Nicaragua’s Momotombo volcano, so frightening the living daylights out of the legislators.

Since then the dream of linking the oceans has surfaced sporadically – not only by water but also by land. Just over a year ago Juan Manuel Santos, the Colombian president, told the FT that Chinese studies were well advanced on a rail link from Cartagena on Colombia’s Caribbean coast to the Pacific.

Mexico has twice tried, without success, to modernise a railway line to form a land bridge across the Isthmus of Tehuantepec. The line was built at the end of the 19th century by the Yorkshire engineer Weetman Pearson, who later became Lord Cowdray and founder of the Financial Times.