MANAGUA, Nicaragua — It speaks to the state of Nicaragua’s transportation infrastructure that I am fortunate to have enjoyed my recent visit without racking up a manslaughter charge.
Ox-pulled carts, bicyclists, motor bikers, auto rickshaws, passenger vehicles and 18-wheelers all share the often merely two-lane Pan-American Highway in the Central American country. Traveling a distance of 30 miles often took more than an hour, and the time tripled once I braved the hilly dirt roads cluttered with pedestrians loath to move to the side.
In other words, the Nicaraguan infrastructure, including undrinkable tap water and frequent power outages, is akin to that of many Latin Amercian third world countries. But the kicker is that most third world countries aren’t pursuing a $30 billion interoceanic canal.
The idea of the Inter-Oceanic Nicaraguan Canal has been floating around since Spanish conquistadors invaded the country in the 1520s. The newest chapter in the ongoing story of bold plans and zero constrution occurred in September, when the government signed a memorandum of understanding with a Hong Kong-based financier for the project.
The wet canal linking the Pacific Ocean to the Atlantic Ocean from Monkey Point to the Port of Corinto, on the Pacific Ocean, would be partially finished by 2019, according to the government. There are also plans for a dry canal, or railroad connection, between the two points. The project would coincide with the construction of a port at Monkey Point, giving Nicaragua deep-water access on the Atlantic Ocean side, according to Tico Times, a Costa Rican newspaper.
Xinwei Telecom is the latest party to bankroll the project, which previously was backed by an United Arab Emirates investor. Before that, then-Russian President Dimitry Medvedez expressed interest. The financial collapse likely helped sober up the United Arab Emirates and Russia, or maybe they finally realized there wasn't much need with another canal nearby. You may have heard of the other nearby canal.
Even if there is enough business for two Central American canals, as Nicaraguan officials say, the gap between development of the projects is staggering. The Panamanian government is expected to expand the canal even after the larger locks, part of the $5.25 billion expansion project, open in 2015. Meanwhile, Nicaragua has yet to break ground on the project, which is estimated to cost nearly 10 times its GDP, according to The Guardian.
The focus on the canal is likely draining attention from the more realistic goal of improving the country’s surface transportation network. The $39.2 million loan Nicaragua received from the Inter-American Development Bank to improve its transportation system is a start but hardly enough. That’s a shame because Nicaragua is enjoying the rewards of the near-sourcing trend. Nicaraguan exports to the U.S. have expanded 21 percent annually in the last 20 years, and more than half of the country’s outbound commodities head to the U.S.
Nicaragua's largest export commodity is knit apparel, followed by by woven apparel; electrical machinery; spices, coffee and tea; and beef, according to the office of the U.S. Trade Representative. The Central America Free Trade Agreement has helped boost trade between the U.S., Nicaragua and the five other member countries, and trade officials say the full benefits of the 2004 pact are still being realized.
But Nicaragua faces growing competition in the apparel market, as Mexico and Panama make larger strides in improving their transportation infrastructure. Instead of viewing the Panama Canal as a potential competitor, Nicaragua should work more to improve its infrastructure so it can better utilize Panama’s ports of Colon and Balboa as transshipment hubs. That’s far less glamorous than the proposed major project aimed at lifting Nicaragua from poverty. But surely even President Daniel Ortega, widely seen as a more economically pragmatic socialist, can see the limits of banking on grand visions of locks, rather than cheaper asphalt.