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 revitalize 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 172-mile (278-km) canal, due to be operational by around 2020, would raise annual economic growth to more than 10 percent. In the Americas, only Haiti is poorer.
The canal could also give China a foothold in Central America, 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.
More than a year since it was first announced, the project faces widespread skepticism, 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.
“Shipping would love for this to happen, but it's a luxury not a necessity,” said Greg Miller at consultancy IHS Maritime. “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.”
Presidential spokesman Paul Oquist said the feasibility studies, including a McKinsey report that experts say will define interest in financing the project, 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 wants the canal to receive international funding and rejected the idea that China's government will bankroll the project, which is worth roughly four times the GDP of Nicaragua.