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Nicaragua approving massive canal project

Thursday - 6/13/2013, 3:35pm  ET

In this June 7, 2013 photo, workers position a ladder to hang a banner on a wharf surrounded by Lake Nicaragua, in Granada, Nicaragua. A multi-billion dollar Chinese plan to plow a massive rival to the Panama Canal across the middle of Nicaragua was headed for approval by the leftist-controlled National Assembly Thursday, June 13, 2013, capping a lightning-fast approval process that has provoked deep skepticism among shipping experts and intense concern among environmentalists. (AP Photo/Esteban Felix)

LUIS MANUEL GALEANO

MANAGUA, Nicaragua (AP) -- A multi-billion dollar Chinese plan to plow a massive rival to the Panama Canal across the middle of Nicaragua was headed for approval by the leftist-controlled National Assembly Thursday, capping a lightning-fast approval process that has provoked deep skepticism among shipping experts and concern among environmentalists.

The assembly dominated by President Daniel Ortega's Sandinista Front was expected to vote overwhelmingly to grant a 50-year concession to build the canal --with an option for another 50 -- to a Hong Kong-based company whose only previous experience appears to be in telecommunications.

Ortega's backers say the Chinese will transform one of the region's poorest countries by turning a centuries-old dream of a Nicaraguan trans-ocean canal into reality, bringing tens of thousands of jobs to the country and fueling an economic boom that would mimic the canal-driven prosperity of nearby Panama.

The currently estimated cost is $40 billion.

"One of Nicaragua's great riches is its geographic position, that's why this idea has always been around," Sandinista congressman Jacinto Suarez said during the legislative debate Thursday. "Global trade demands that this canal is built because it's necessary. The data shows that maritime transport is constantly growing and that makes this feasible. Opposing it is unpatriotic."

The Hong Kong company has provided virtually no details about the canal, even its potential route, but it would certainly cross Lake Nicaragua, the country's primary source of fresh water. If one of the world's largest infrastructure projects ever is actually built, the water used by the canal's locks could seriously deplete the lake, environmentalists say.

Global engineering and shipping experts say those concerns are real, but lowered demand for massive container shipping and increasing competition from potential routes, including the warming Arctic, may mean that the Nicaraguan canal will simply prove economically unfeasible, adding to a long list of unrealized visions of moving riches from sea to sea across the country.

Either way, the quick march of the canal project through the National Assembly has set off a backlash from environmental and other activists, who held a series of marches this week to protest the granting of rights to the HK Nicaragua Canal Development Investment Co., without any open bidding process or details of its financing.

"Nicaragua isn't for sale. Nicaragua belongs to all Nicaraguans and isn't the private property of Ortega and his family," the Movement for Nicaragua, a coalition of civil-society groups, said in an open letter to the country Wednesday.

When he took power in 1979, Ortega was a socialist firebrand whom the U.S. government tried to overthrow by backing Contra rebels in the 1980s. He was voted out of office in 1990 but returned after winning the 2006 election. Since then, critics allege, the 67-year-old leader has maneuvered to become president for life, using courts and electoral institutions that are stacked with appointees from his Sandinista Front.

In 2009 the Sandinista majority on the Supreme Court overruled limits on consecutive terms set by the Nicaraguan constitution, allowing Ortega to run for his third 5-year term. He won 64 percent of the vote, though opposition parties allege that total was inflated by fraud.

Other recent Nicaraguan presidents also have repeatedly tried to win support for a canal, without much success. Ortega, though has finally agreed on a formal deal.

North American companies are increasingly looking to factories and suppliers in the U.S. and Latin America rather than in Asia, where rising salaries in China are making manufacturing less appealing for foreign companies.

In addition, the global economic slowdown of recent years means large numbers of ships are unused, perhaps 5 percent of the global fleet. Many vessels are scheduled to be completed in coming years, meaning the percentage of idled ships could grow to more than 20 percent, experts said.

And global warming means that even the Arctic may become a viable alternative to crossing Central America by canal.

"Looking at the changing flows and where the growth is in the world economy, personally I'm not seeing it. I wouldn't invest my money in it," said Rosalyn Wilson, a senior business analyst at the Delcan Corporation, a Toronto-based transportation consultancy and author of the U.S. logistics industry's annual report.

"It's addressing a need that definitely is not here now and I'm not sure if it's 'a build it and they will come sort of thing,'" she said.

Eduardo Lugo, a Panamanian port logistics consultant who worked for 10 years studying traffic demand for the Panama Canal's expansion plan, also questioned whether global traffic demand would support the high costs of the Nicaragua project.

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