Nicaragua's 'grand canal' dream in sight

MANAGUA, Nicaragua - Five centuries after Spain's King Carlos V first thought of cutting a canal through Nicaragua to link the Atlantic and Pacific oceans, the tiny nation has a date in sight for a "Grand Canal" to dwarf Panama's.

As Panama prepares to widen its congested 92-year-old waterway to squeeze through more of today's bigger ships, Nicaragua plans to build a bigger, deeper canal by 2019 to cater to the supersized freighters of the future.

An international tender for a consortium of private companies to build and operate the canal, which would generate much-needed royalties for the impoverished nation, could be launched by the end of 2007, planners say.

"We are not competing with Panama. We are complementary. We are doing different things," said Mario Alonso, president of the Central American nation's canal commission and a former central bank chief.

Building the canal has been a Nicaraguan pipe dream for decades, but past plans never got off the drawing board. Alonso insisted the latest proposal was different.

"In 2013, we will mark 500 years of talking about this. But this is the first time in the 500 years that we are actually studying this as a project," he said on Monday, a day after Panamanians voted overwhelmingly to enlarge their canal.

Nicaragua sees its canal taking 5 per cent of the world shipping market, with a dozen or so 250,000 deadweight tonnage (dwt) super-freighters passing through each day.

Alonso said Panama's canal - which even enlarged will not be able to handle ships above 130,000 dwt - could easily maintain its 3-4 per cent market share with small to medium-sized ships.

Engineers estimate ships too big for the Panama canal will be able to get through Nicaragua's 286 km long canal in 26 hours, saving them a 36-day haul around South America's treacherous Cape Horn and US$2 million ($3 million) in extra costs.

"We'll be good for all kinds of boats, even bigger than 250,000 dwt if necessary," said Alonso, whipping out a calculator to show it would take days of train travel to transport the same cargoes via a "dry canal" overland - another idea that had been mooted for crossing the Isthmus.

At US$18 billion, the canal would cost nearly four times Nicaragua's annual gross domestic product (GDP) to build, all the cash coming from private investors.

Planners say it could double the country's economic growth rate to 9 per cent a year and nearly triple per capita GDP to US$2,260 by 2025. Construction alone could create 40,000 jobs.

Environmentalists, however, are alarmed about the impact the canal would have on Nicaragua's tropical forests, indigenous villages living near the Caribbean coast and on coral reefs and sea life.

Alonso said international experts were conducting an environmental study, and said the canal project would involve planting trees across a 40,000 sq km area of former forest depleted by loggers.

The canal would be dug through the country's southern lowlands, rather than by dredging rivers - which is environmentally damaging.

Nicaragua - whose name combines a pre-Hispanic indigenous race, the Nicarao, with the Spanish word for water, agua - has more than ample fresh water.

The two rivers that would be used to feed the canal alone send 10 times as much water flowing into the sea as would be needed, Alonso said.

The waterway would link the Pacific with Lake Nicaragua, also known as Lake Cocibolca and Latin America's second-largest freshwater lake, and then with the Escondido river which empties into the Caribbean at the port of Bluefields.

The commission is drawing up a law to allow private firms to operate the canal while Nicaragua would own it. It is also preparing a bid prospectus and a publicity campaign, and says it has already been contacted by a dozen interested companies from Asia, Europe and the Americas, among them Britain and Brazil.

- REUTERS