Why CHINA wants to build another canal in Central America if there is already one in PANAMA? 2022-23

Why CHINA wants to build another canal in Central America if there is already one in PANAMA?

There are certain strategic points around the world where canals play a very important role: saving thousands of kilometers in the transport of goods and passengers, for example. The Suez Canal is located in Egypt and connects the Asian and European economies.

This canal avoids ships having to border the entire African continent, thus reducing the distance by at least 8 000 kilometers, depending on the origin and destination in 2021, just over 20 000 ships transited this channel or 54 per day on average, representing 12 percent of world trade.

Thus, waterways are vital for the development of the world economy on the American continent. Three places have been considered for the construction of a canal for centuries. Central America.

One is the Tehuantepec canal in Mexico, which is already under construction, but it is not a maritime canal, but a multimodal canal that includes roads, railroads, and ports. Another is Panama, which has been in operation for more than 100 years, and another in Nicaragua. Central America.

The latter has been attempted dozens of times but has never been built, although there are recent indications that lead us to believe that it could finally be carried out so the questions are: why did the united states change its decision to build the canal through Nicaragua and finally choose Panama?

Why a canal through Nicaragua does not make economic sense, but why does it make geopolitical sense for China in the coming years? At the beginning of the 20th century, the united states was a rising maritime power, and building a canal in central America was essential to defend its Atlantic and Pacific coasts. Central America.

So in 1900, the u.s congress approved a canal in Nicaragua, but it was the country’s active volcanoes and seismic activity that led the united states to choose Panama as the site for the Panama canal. At that time it was not an independent country as it is today. It was still part of Colombia, so the united states helped Panama to separate from Colombia. Central America. Central America.

Then the u.s bought the ownership rights to the canal from a bankrupt french country that had already begun construction and finally, in 1914 the Panama Canal was inaugurated in 1922. The united states compensated Colombia with 25 million dollars for the loss of Panama for more than 20 years. Panama has been the absolute owner of the canal and is currently one of the most prosperous countries in the region, thanks in part to the economic dynamism generated by the canal.

So, in the same way, Nicaragua hopes that an inter-oceanic canal in its territory will lift the country out of poverty. Precisely in 2014, the Nicaraguan government announced the construction of the canal by a Chinese businessman who owns the company. Central America.

The canal would cost about 50 billion dollars. That is three times more than Nicaragua’s GDP of 15 billion dollars. It would generate at least 50 000 jobs, hence the expectations generated by the project among Nicaraguans.

However, despite the great promises of development that the project would bring, it was supposed to be completed by 2019 but was never built. The Chinese company’s main argument for building the canal was that the Panama Canal was not built very wide. Central America.

so larger container ships could not pass so a wider and more modern canal in Nicaragua was the solution, but the Chinese company never presented how it would plan to raise the amount of money needed to build it, and as if that wasn’t enough, the owner of the company lost 80 percent of his equity in the Chinese stock market crash in 2015 just two years after he committed to building the canal, but that is not the only reason why the project wasn’t started.

Central America

The other is that it may not have been financially viable. It turns out that in 2013 when an agreement was reached between Nicaragua and the Chinese company, it was anticipated that the Panama Canal would not be large enough to support the growth in world trade and the passage of the largest ships.

However, the Panama Canal began an expansion project of its own that was completed in 2016 and doubles the canal’s capacity before the expansion it could allow ships with the capacity to carry 5000 20-foot containers to pass through after the expansion. Central America.

It allows vessels of 13 000 containers, but the Panama Canal, even expanded, cannot receive vessels larger than 18 000 containers, and the Nicaragua canal project can. The point is that these types of vessels only represent 10 percent of world trade, and not all of them have the Panama route.

So it is not that there is excessive demand for a canal of the size Nicaragua wants to build, and given the cost of the project of at least 50 billion dollars, the tariffs or tolls it would have to charge would be much more expensive than those of Panama to be profitable. Central America.

This is what the head of press for Maersk, the world’s largest container shipping company, had to say about the idea of another canal in central America: it’s not something we have a demand for, and we are not able at this point to tell whether we will use it it may be so heavily priced that we may not use it.

On the other hand, most ports in the united states wouldn’t be able to accommodate the larger vessels that the Nicaragua canal is aiming for. U.s ports would need very high investment to prepare for such vessels. Additionally, it is not that a canal in Nicaragua is very far from the Panama Canal, I.e. Central America.

It would not translate into a great difference in the distance if a ship decided to cross through the Nicaragua canal instead of the Panama Canal, in other words, the only differential factor of the Nicaragua canal would be its size unless world trade grows so much in the coming decades that it saturates, the Panama canal.

Therefore, it will be difficult for investors in such a costly project, which also implies expropriating tens of thousands of farmers to obtain the expected benefits. However, there is a possibility that this project does not have a commercial and economic objective, but a political objective on the part of china. Central America.

That is if the project were backed by the Chinese government, then it would matter little whether it is profitable or not, as its purpose would be to fulfill more of a geopolitical role in 2014 the Chinese government said it was not involved in the project, but the world has changed a lot since that time.

Let’s think that in 2014 Obama was the president of the united states and china was not so ambitious in terms of its influence in global geopolitics. The relationship between the two countries was less confrontational, but now that china wants to take the place of the world’s first superpower or at least share the position with the united states, the Nicaragua canal project may make a lot of sense for china in geopolitical terms.

Maritime power is of great importance because it allows easy access to raw materials and world markets. Today, as was seen in Russia, and Ukraine, conflict wars are being transferred to the economic and commercial field, and although the united states no longer administer the Panama Canal, there is a clause that allows the united states to retake control of the canal. Central America.

In the event of a state of emergency or war, so given the event of a conflict with china, a canal in Nicaragua controlled by china would guarantee not only a passage for Chinese shipping connecting the Atlantic to the pacific but could also have military use.

Thus, whether out of ambition or the need to challenge the united states in this part of the world, the resurrection of the Nicaragua canal project could happen at any time. In fact, in December 2021 Nicaragua broke off relations with Taiwan, a nation that conflicts with China, and, at the same time, Nicaragua re-established relations with china. Central America.

Therefore, China will do everything possible through projects and loans, to keep daniel, and Ortega. As president of Nicaragua and thus increase its influence in Central America and prevent Nicaragua from having relations again with Taiwan. Central America.

Moreover, the Chinese businessman who was going to build the canal in 2014, reappeared congratulating Daniel Ortega for winning the presidency in 2021, so the project will likely be revived and even though it has no apparent financial return, it can be very attractive to china from a geopolitical point of view.

Why CHINA wants to build another canal in Central America if there is already one in PANAMA? 2022-23. Why CHINA wants to build another canal in Central America if there is already one in PANAMA? 2022-23