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(Latin America Advisor) — Nicaraguan President Enrique Bolanos last week lobbied for support for a second international waterway in the Central American isthmus linking the Atlantic and Pacific Oceans to complement the Panama Canal. What are the chances for construction of a second canal? Does current or projected maritime trade justify a second canal? Who would pay the estimated $18 billion cost of the new waterway?

Donald Planty, President of Planty & Associates and a former US Ambassador: I believe that the chances of a second canal through Central America are remote. There are several factors at work here. First, we need to see how the Panamanians will vote on the referendum for a modernized Panama Canal. If the vote is positive, an expanded Panama Canal is more likely than a Nicaraguan project. Even if the Panamanians reject the canal in the referendum, that vote is probably not the last word on Panama's efforts. The Panama Canal will be the sub-region's principal north-south waterway for the foreseeable future. Cost is another factor. The $18 billion price tag on the Nicaraguan proposal is very high, and it is not clear that there is sufficient traffic to justify a second canal at that price. There is also the upcoming Nicaraguan election to consider with the fallout from a possible Ortega victory. Moreover, a Nicaraguan canal would raiseserious environmental and ecological issues that could take a long time to resolve. In short, I do not believe that a Nicaraguan canal is a viable project for the near term.
Steve Johnson, Latin America Policy Analyst at the Heritage Foundation: Any $18 billion to $20 billion investment in public works would be a shot in the arm to Nicaragua's economy. Nicaragua has the second lowest GDP per capita in the Hemisphere, and a project of this magnitude would help reduce its 70 percent poverty rate. It represents a bold surprise for outgoing President Enrique Bolanos, although not a new idea. Nicaragua had been considered a site for a trans-isthmus canal before Panama, but was abandoned partly because of the country's seismic geology. The proposal comes at a crossroads—presidential elections. It provides a clear contrast between constructive visions for generating commerce and presidential candidate Daniel Ortega's utopian ones of reviving an authoritarian welfare state. The financing may be there, but the obstacles will be daunting: endless studies, environmental battles, the seismic issue, and supporting infrastructure. Panama grew up around its canal, is now an international business hub, and has developed management expertise. Nicaragua would have to do the same. Increasing traffic may justify another canal, but it's a guess that Nicaragua could dredge the San Juan River, cut channels from Lake Nicaragua to the Pacific, and build locks in time to compete with Panama's project. Panama needs only $5 billion, less dredging, and two new locks.
Rodolfo R. Sabonge, Corporate Planning and Marketing Director at the Panama Canal Authority: Nicaragua's recent canal proposal has no influence on the Panama Canal Authority's (ACP) expansion project. The ACP has conducted comprehensive analyses and studies ... in the following sectors: environment, finance, economics, water, socioeconomics, and the maritime industry. The ACP presented its recommendation to expand the Panama Canal to Panamanian President Martin Torrijos on April 24, 2006. The expansion proposal was later unanimously approved by Panama's National Assembly. Nicaragua's proposal presented in Managua estimates the project's cost at $18 billion, the canal would span 286 km, and involve four sets of threelevel, double-lane locks. The report does not go into detail about operational and maintenance costs, but it is reasonable to say that an expanded Panama Canal —  with a capital investment of $5.25 billion, a distance spanning 80 km, and only two sets of locks — would be less expensive to operate and maintain. Panamanians will vote October 22 in a national referendum on expansion. The project would build a third lane of traffic along the waterway through the construction of a new set of locks, which would allow more traffic and double Canal capacity. The Panama Canal is nearing maximum capacity. An expanded Canal would benefit the people of Panama and world trade, and would help maximize Panama's strategic location to become the great maritime hub of the Americas.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter.

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