Online | January 25, 2015 at 7:11 pm

A Grand Undertaking

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“The drive to the church is extremely emotional because you’re finally seeing it all come together,” Ms. Mariela Wade explains to the HPR, as she and Más Hope, the non-profit organization she founded, delivers used shoes from the United States to the impoverished citizens of Nicaragua. Her trip is long and arduous like that of so many others working for NGOs in the area. Yet Ms. Wade is grateful to play a part in the development of Nicaragua, a process that has involved the country’s government, non-profits, and other international partners. For her, the long trek is worth seeing the fruits of her labor; “The shoes upon shoes we unload would have been thrown out in the United States. But when the kids see the shoes their eyes light up. For some of them, it’s their first pair. It’s so amazing to see something we consider trash to be so useful for these children and people that work in Nicaragua. It’s something they are going to use everyday to work in the fields. It’s a huge lifesaver really.”

The shoes Ms. Wade and Más Hope deliver bring both hope and salvation to the struggling citizens of Nicaragua. Many Nicaraguans direly need the shoes to battle the harsh working conditions and poverty that the country’s agricultural workers often face. In fact, the agriculturally based nation is the poorest in Central America, with 42 percent of the nation living in poverty and one in seven Nicaraguans living in extreme poverty—defined as living off of $1.25 or less each day. The country’s underdeveloped infrastructure—its insufficient and tattered roadways, buildings, and communication lines—limits the ability of citizens to receive basic services and engage in trade. The development of said infrastructure is further slowed by frequent natural disasters and the region’s extreme tropical climate.

Despite these difficult circumstances, Nicaragua has seen some economic and social improvements in recent years. Due to efforts by the International Development Association, a division of the World Bank, Nicaragua has been able to stretch its limited resources further than ever before. IDA projects in Nicaragua have included Casas Maternas, which uses NGOs and local volunteers to provide health care to expectant mothers, and the Módulos Comunitarios de Adoquines project, which builds rural roads using local manpower.

While the efforts of the IDA alongside those of international non-profit organizations such as Más Hope have proven somewhat successful and Nicaragua has experienced steady and stable GDP growth in recent years, the country’s government has decided that more needs to be done to speed up the process of economic development. President Daniel Ortega has partnered with wealthy Chinese investor Wang Jing to embark on a $50 billion project to build a canal connecting the Caribbean Sea to the Pacific Ocean. With construction of the “Nicaragua Grand Canal” having officially begun on December 22, 2014, some are optimistic that the dream of bold economic development may finally come true. But with a concerning set of financial, social, and environmental obstacles, the Nicaragua Grand Canal may result in a grand failure.

Connections and Competition

The idea of building a transoceanic canal across Nicaragua is not a new one. Proposals to build such a canal have existed for more than 100 years. The United States seriously considered sponsoring a similar project in the early 1900s. However, concerns about volcanic activity in the region eventually led the American government to back the now world-renowned Panama Canal farther south.

Now, over a century later, Chinese tycoon Wang Jing and his Hong Kong-based consortium, the Hong Kong Nicaragua Canal Development Investment Co., have agreed to undertake the project. Contact between Wang and President Ortega began shortly after the president’s son Laureano met Wang during a trip to China in 2012. By June 2013, the president and Wang had signed an agreement to construct the canal.

While both sides quickly began making preparations, doubts also soon arose. For one the project is estimated to cost $50 billion, an amount more than four times the size of Nicaragua’s $11 billion economy. A year and a half after the agreement was signed, the Chinese firm has secured only $200 million in funding.

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Chinese Tycoon Wang Jing discussing plans for the Grand Canal.

Aside from financial concerns, there are also concerns about just how competitive the canal will be if it is completed. One of the advantages the Grand Canal would hold over the Panama Canal would be the former’s geographic location. Its higher latitudinal position would create a faster route to and from the United States. In addition, the Grand Canal will be constructed to allow for the passage of the largest trading ships currently on the waters. These “Triple-E” ships can carry four times the capacity of “Panamax” ships, the largest ships the Panama Canal currently supports.

With these two distinctions it may seem clear that the Nicaragua Grand Canal would be able to easily compete with, if not replace, the increasingly outdated Panama Canal. However, the Panama Canal is set to complete its own renovations by early 2016, years before any significant work will be completed on the Grand Canal. These renovations will double the canal’s capacity, allowing for significantly larger ships to pass through. These renovations will still not allow for the Triple-E’s that would be supported by Nicaragua’s canal, but they do decrease the competitive gap between the two. The Panama Canal also has a long established relationship with the United States, one that will likely continue well after the completion of the Grand Canal, especially considering the United States’ current concerns regarding the lack of transparency surrounding the Nicaraguan project on the parts of both Wang Jing and the country’s government. Thus, competition with the Panama Canal may inhibit the Nicaragua Grand Canal from drawing as much revenue as some expect.

For the People?

Concerns have also arisen regarding the potential environmental consequences of the project, with the Nicaraguan government failing to produce an environmental impact report prior to signing the agreement with Wang Jing. State officials now claim the environmental impact will prove minimal, but specifics regarding their impact and feasibility reports have been concealed from the public. The government’s assessment also goes against most other local and international speculations concerning the project.

The canal is set to carve through fishing and farming communities and some of Nicaragua’s most precious natural reserves. The construction may also cause harm to Lake Nicaragua, the largest freshwater reservoir in Latin America. Projections by Centro Humboldt estimate that by 2039 there will be insufficient water to retain the lake if the canal is built. For a country like Nicaragua that has an agriculturally dependent economy, the potential environmental impact could prove catastrophic as farmland and water resources are heavily damaged.

Beyond financial and environmental concerns, the immediate impact of the canal on local citizens is perhaps what has caused the most uproar. Construction of the canal has been projected to displace over 100,000 Nicaraguans living along the proposed route. Not only does this unjustly violate the citizens’ sovereignty, according to opposition leaders, but some residents are also claiming that their property has not been properly valued for expropriation. The government has done little to respond to the concerns of citizens, and as frustration has grown among them, a multitude of protests have sparked up across the country.

Furthermore, many have questioned whether the canal will actually yield any substantial benefits for the Nicaraguan people in the long run. Some projections estimate that the canal will create 50,000 jobs during its five-year construction period and another 200,000 once the canal is completed. However, nowhere has it been specified just how many of these jobs will be awarded to Nicaraguans and how many will be given to Chinese laborers. These projections, moreover, rely on the assumption that the canal will actually be completed. The deal currently grants Wang Jing’s company exemption from legal recourse or economic sanctions if it fails to complete the project. Therefore, with only limited funds currently available and weak incentives for Chinese partners, it seems as if the dream of a “Grand Canal” may still be just that—a dream.

An Alternative Path

Fortunately, although the Nicaragua Grand Canal is an uncertain and perhaps unwise undertaking, the country has other options in the realm of development. In fact, the IDA and the International Finance Cooperation are already implementing a five-year Country Partnership Strategy for Nicaragua that began in 2013 and will run through 2017. According to the World Bank, “[the CPS] will bolster activities to expand coverage and quality of preschool, primary and secondary education; improve maternal and child health; expand access to water and sanitation services, and promote efficiency and transparency in social investment. It will also help to improve infrastructure, increase productivity and exports diversification, and facilitate trade and access to financial services.”

While the goals of the plan may seem lofty at first glance, the strategies developed to accomplish these goals are much less so. One of the main components of the CPS involves utilizing groups and resources from across various sectors to approach the dilemmas of development. In particular many have advocated for both greater cooperation between governmental and non-governmental organizations and for greater allowance of non-governmental organizations to spearhead grassroots efforts. As Wade notes, “The government doesn’t necessarily try and push them away, but the government doesn’t do as much as it could to really bring in non-profit organizations…. Because Nicaragua’s such a small country, [any] help they do get from these organizations is monumental.” Whether it’s with a pair of shoes or a pair of helping hands, hope and progress in Nicaragua often spring from the work of these NGOs. Thus, a greater push by the government to lure in the help of non-profit organizations could yield great benefits for the country.

With the Grand Canal highlighting the issues of infrastructure development and global economic competitiveness, it should be noted that the CPS for Nicaragua also addresses these issues. The CPS outline states that before the beginning of its implementation “only 13 percent of the road network [was] paved and that only 42 percent [was] in good or fair condition. As a result, less than a third of the population [had] access to a paved road.” Today, one of the initiative’s top priorities is improving roadways in Nicaragua, a move that will aid in service delivery, help boost competitiveness, improve productivity, and facilitate exports in the long run. While improved roads may not bring as large of a flow of trade as the Grand Canal could, they are perhaps more vital to internal development, as trade would be enhanced within the country’s borders rather than simply through them. This strategy approaches Nicaragua’s economic challenges at a more realistic scale than the Grand Canal while also conferring greater benefits to its citizens.

Furthermore, the current partnership between Nicaragua and the World Bank is already well established and is more secure than relations with Wang Jing and the Chinese in general. In fact, the World Bank takes pride in noting that Nicaragua’s current program is the best performing portfolio in Central America and that past efforts have brought significant improvements to the country. These include the expansion of telecommunication services and the improvement of water and sanitation facilities.

Nicaragua and its people will likely soon realize that the Grand Canal is not a viable and sustainable project. But whether the country ultimately embarks on the journey of economic development alongside Wang Jing or the World Bank, the road will neither be easy nor short. That being said, by focusing on realistic goals with reliable partners, Nicaragua would much better position itself to steadily accomplish its goals of internal development and global competitiveness over the long haul.

Image sources: Wikimedia, insidecostarica.com

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