Nicaragua Grants Chinese Tycoon Rights To $40 Billion Canal Project

Nicaragua has granted a Chinese company the rights to build a canal across the country, from the Atlantic Ocean to the Pacific. On Thursday, the Central American country's single-chamber legislature approved a controversial law which will allow the Hong-Kong based HK Nicaragua Canal Development Investment Company to begin work next year on construction of a long-awaited rival to the Panama Canal. In doing so, Nicaragua gives the company - set up in October 2012, with a holding company in the Cayman Islands established that same year -- complete rights over the canal for 50 years, with the option of extending it another 50. The cost of the project has been estimated to reach over $40 billion.

The company's CEO, Wang Jing, is a Chinese telecom tycoon, according to Time magazine. Also in 2012, his Beijing-based Xinwei Telecom Enterprise Group was awarded a $300 million telecommunications contract in Nicaragua. Time writes that little is known about Wang Jing and that he has visited Nicaragua just once, giving what it called "a stiff, no-smiles photo op" with leftist President Daniel Ortega last September. China is the fastest-growing investor in Latin America, a region with a rising middle class and a huge capacity for exports to nearby United States markets.

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IPS News reports that construction on the canal is slated to begin in May 2014 and last for 10 years. A London firm has been commissioned to carry out feasibility studies. The state would hold a 51 percent stake in the canal, with the other 49 percent going to investors. The canal will be built across about 120 miles of land as well as about 50 miles of Cocibolca lake, and it will be about 500 feet wide -- able to service bigger ships than those which cross the Panama Canal.

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Paul Oquist, one of Ortega's economic advisers, has said the canal project will prove to cause a "social and economic revolution," putting the country's GDP growth into the double digits and tripling the country's formal employment within four years. The government claims it will eradicate poverty in what is the western hemisphere's second poorest country. But the law's passage has been received less warmly in other quarters.

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Environmentalists, including Ortega's top environmental advisory, have shown concern that it could spell trouble for the country's water supply, especially Lake Nicaragua, one of the most important sources of drinking water in Central America. Business groups say that the state will run roughshod over property rights over the course of the canal's construction and spook investors. And civil society groups worry that Ortega and his Sandinista party backers have ensured their own grip on power for another 50 years, even if their candidate isn't president, through the Canal Commission, which they believe will continue to represent the interests of the Sandinistas and Canal Development Investment Company. A petition against the canal signed by 21 civil-society organizations reads, "Nicaragua is not for sale. Nicaragua belongs to all Nicaraguans and is not the private property of Ortega and his family."