Nicaragua Canal project seen having geopolitical, not just trade implications

If a proposed US$40 billion Chinese group project to build a channel to link the Atlantic and the Pacific oceans through Nicaragua materializes, it will have not only enormous implications for global trade but also huge geopolitical consequences, according to international relations experts talking to the Herald.

"In the same way that the Panama Canal was the US canal in the XX Century, a Nicaragua Canal would eventually be the Chinese Canal in the XXI Century," Juan Gabriel Tokatlian, a lecturer with the private-run Di Tella University said.

"Shipping development, and the need for supertankers and safe routes have revived the Nicaraguan possibility first considered in the XIX Century. Increasing trade is the reason behind the Panama Canal current expansion.

However, international trade trends point to a superlative preeminence of the Pacific and all this led Nicaragua to re-float this idea which has found strong Chinese support."

A diplomatic source who talked on condition of anonymity said: "It is yet to be seen if actually the project goes ahead, who funds it, and if global trade increases or not, because there is strong protectionist trend.

"However, the Chinese think for the long run, even for centuries ahead, and some time trade will have to recover," the diplomatic source added.

"If the Nicaragua Canal is finally built, it will siphon off traffic from the Panama Canal and the Chinese will likely have a more relevant geopolitical influence in Nicaragua that, so to speak, is not a country fully integrated into the Western system.

"Additionally, anything detaching the Southern Hemisphere from the Northern one will not necessarily benefit the South."

"When the Panama Canal was inaugurated in 1914, the Cape Horn route – which gave Argentina and Chile a strategic relevance – was lost, and when the Suez Channel was built, the trade around the Cape of Good Hope also lost steam.

"Argentina has the longest distance to North America, to Europe and to Asia trade centres. It has to recover its historical hemispheric unity vocation. We have never been too enthusiastic about UNASUR, because it leaves the US, Canada, Mexico and the Caribbean out. Let’s recall that as Caribbean countries were gaining independence, they became members of the Organization of American States at the behest of Argentina. Even Canada became an OAS member on the back of Argentina’s initiative. There are other countries not so interested in that Northern vertical view."

Under the Peronist government of President Cristina Fernández de Kirchner and that of her predecessor and late husband Néstor Kirchner, Argentina became a close ally of Venezuela, Bolivia, Ecuador and other left-leaning states.

Asked whether the US has been caught off guard by the Hong Kong-based HKND group headed by Chinese lawyer Wang Jing which is leading the Nicaragua Canal project, Tokatlian said that the Panama Canal lost a lot of geopolitical relevance for Washington as the US west coast doesn’t need to go through Panama to trade with Asia and the east coast doesn´t need it either to trade with Europe.

"Actually, the Panama Canal has been more relevant for several other countries to reach the Pacific and for some Asian countries to reach Europe and the Atlantic coast of Latin America. "Today, the US may be somewhat concerned geopolitically by a Chinese presence in the area, but not because either canal may prevail over the other."

‘Mysterious businessman’

Wang, 41, has been widely described as a "mysterious" businessman. He himself has admitted that many don’t believe his allegations that the Chinese government is not supporting his group on the sly.

Chinese President Xi Jinping and other current and former Beijing leaders have visited Wang’s wireless communication technologies firm.

Tokatlian, asked whether he thought that funds for the Nicaragua Canal project may come from Beijing, replied: "I would not doubt it."

He recalled that that a group from Taiwan, and to much more extent a Hong Kong-based Chinese group, participated in the Panama Canal expansion, adding that the US Congress held many hearings early this century about how to limit the Chinese presence in the Panama Canal expansion and that there were allegations that the Hong-Kong based group participating in the new Panama Canal was actually channeling funds not just from the Chinese government, but specifically from the Chinese Army.

"It is not possible to assert that the Chinese Army may be also participating in the Nicaragua Canal project. But China’s geopolitical interests are increasingly evident," Tokatlian said.

Asked for his view, political pundit Rosendo Fraga said: "No Chinese group makes such a move without the interest or the support of the Chinese government."

However, Jorge Castro, a Strategic Planning Secretary under the neo-conservative Peronist administration of Carlos Menem (1989-1999), said that there was no mystery at all. "China is the axis of the world economy. The Chinese government is not behind the Nicaragua Canal project. There is nothing hidden."

Besides, he added, "China is the leading strategic ally of the US. Presidents Xi Jinpin and Barack Obama signed an accord in California in June 2013."

The anonymous diplomatic source said that Chinese reserves are denominated in dollars and in US bond and hence "for China, there is the need that the US doesn’t go fully bankrupt. Besides, trade deals continue to be conducted in dollars and there is nothing that may lead to think that it could be replaced by another currency despite the dollar’s devaluation."

By Guillermo Haskel