The Panama Canal has been synonymous with cross-continent trade for about a century. Now, there’s some competition, and with recent approvals this week, a fully functional canal in Nicaragua is under works. While many believed, and still believe, that this type of project couldn’t be completed in Nicaragua, this week solidified plans to make it a reality. And in this case, much like Panama’s new canal development, the main investment is from overseas.
Why Nicaragua?
The Nicaraguan Canal project is directly inspired by, and modeled after the Panama Canal. It is based on the idea that by offering an alternative route to land travel, and Panama’s main waterway, they can build a competitive shipping route which will in turn support its host countries, as well as its investors. What was once solely Panama’s is now open to a new market; at least that’s what the Nicaraguan government, and Chinese investors would like you to believe.
Nicaragua has cheap labor, relaxed laws in relation to property development, and a great location that stretches a longer, yet similar path as Panama, connecting two oceans. Nicaragua is also one of the poorest countries in the western hemisphere, and in desperate need of an economic boost, as well as a sustainable source for industry.
In reality, the Nicaraguan plan is far from feasible, despite having major financial support, and an open market to support demand. The problem, in this case, is the logistics of it. Building a canal, through a densely forested tropical country that is under-developed is a daunting task. It’s also an expensive one. According to Nicaraguan reports, the total cost for developing this new canal will be around $40 billion, with the majority of funding coming from the Chinese.
Can it Compete With Panama?
According to Simon Bennett, director of external relations at the International Chamber of Shipping and the International Shipping Federations, the jury’s still out on the feasibility of this new canal. However, it seems that all options are still being left on the table:
“Obviously, at a simple level it would provide competition to the Panama Canal that currently enjoys a quasi-monopoly. But that would all depend on whether or not a canal in Nicaragua will ever actually come to pass,” Bennett says. How much the canal would charge for tolls is another question, although a hypothetical one for now.
While the project’s goal is to give Panama some competition, the reality of how it can, is still a mere ideal. With a price tag that’s billions ahead of Panama’s recent canal expansion, the Nicaraguan canal is not likely to be completed. And, even if it is, the logistics of managing the ship flow, plus new business, will take years to perfect. Even so, it’s important to acknowledge the pure scope of this project. If completed, it may open up competitive markets that are more niche than the standard shipping vessels of Panama’s canal. It also may offer a cheaper, albeit less reliable alternative for cross-ocean shipping. This doesn’t worry Panamanian officials much, but they are well aware of the progress of Nicaragua’s new project, and will be monitoring it closely.
Whether it’s considered a monopoly, a relic of older times, or a tourist destination, the Panama Canal is far from being outdated, or outperformed. With the latest developments and improvements, the new Panama Canal will be prepared for nearly the biggest, and most efficient ships on the planet. And with the country set up to facilitate a whole new range of shipping, the future looks bright for Panama.
