Nicaragua announces start of China-backed canal to rival Panama

MANAGUA — Nicaragua on Monday announced the start of work on a $50 billion shipping canal, an infrastructure project backed by China that aims to rival Panama's waterway and revitalise the economy of the second-poorest country in the Americas.

The groundbreaking was largely symbolic, as work began on a road designed to accommodate machinery needed to build a port for the canal on the Central American country's Pacific coast.

Nicaragua's government says the proposed 278-kilometre canal, due to be operational by around 2020, would raise annual economic growth to more than 10 per cent.

The canal could also give China a major foothold in Central America, a region long dominated by the United States, which completed the Panama Canal a century ago.

Construction of the new waterway will be run by Hong Kong-based HK Nicaragua Canal Development Investment Co. Ltd. (HKND Group), which is controlled by Wang Jing, a little-known Chinese telecom mogul well connected to China's political elite.

Flanked by Nicaraguan President Daniel Ortega, who is a former Marxist guerrilla leader, Wang Jing said the tender for the preliminary design of the project would be offered by the end of the first quarter of 2015, by which time an environmental impact study would also be finished.

By the end of the third quarter, excavation work would begin, with a tender for the design of the locks due by the end of the year, he added.

More than a year since it was first announced, the project faces widespread scepticism, with questions still open about who will provide financing, how seriously it will affect Lake Nicaragua and how much land will be expropriated for it.

"Given how much this will cost, it's hard to take a stance on whether it will happen or not until there is a signal whether that money is available or not," said Greg Miller at consultancy IHS Maritime.

In the Americas, only Haiti is poorer than Nicaragua.

Earlier, Nicaraguan presidential spokesman Paul Oquist said feasibility studies, including a McKinsey report that experts say will define interest in financing the canal, had been delayed by changes to the route and would be ready by April.

Oquist said the "core financing" would come from public and private Chinese money, without giving a percentage.

But he added that Nicaragua is seeking international funding and rejected the idea that China will bankroll the project worth roughly four times Nicaraguan gross domestic product.

According to Wang Jing, HKND Group is preparing to launch an initial public offering.

He told reporters in Managua that he hoped the listing would take place in the stock market that offered the best conditions.

Wang Jing gave no details of how much HKND aimed to raise, nor when the offering might be. He said the company was preparing a prospectus which would reveal the investors behind the waterway.