China and Central America

canal

In the summer of 2013 Chinese entrepreneur Wang Jing announced that he would achieve one of the world’s greatest engineering feats by 2019. Building a canal across Nicaragua to link the Pacific and Atlantic has been the dream of engineers and politicians for hundreds of years, but Wang is determined to make it a reality. Of course there is already a Panama Canal doing the same job, it is seriously overcrowded, but is currently enjoying a major refit and expansion.

A White Elephant?

The feasibility of the project is already under question, to raise that kind of funding, estimated at USD 40 billion, in order to build a canal of this magnitude; Wang Jing will have to obtain funding from a major bank. Assuming he uses a Chinese bank (in the past he has worked with the China Development Bank, who are highly active in the region); such a loan would have to get political approval from Beijing. While the Chinese government would be keen to see a “Chinese canal” in Nicaragua, giving it great power in the America’s and beyond as it would control one of the world’s most important shipping routes. However, they might be unwilling to provoke the world’s superpower, the Panama Canal, although no longer under direct control of the US, remains very much under its influence and any move to provide competition to such a strategic route will set off alarm bells in Washington.

Alarm Bells in the State Department

I think the project is a long shot; the canal would be three times longer than the Panama Canal and would face justifiable environmental objections as it would cut through Central America’s biggest freshwater lake. The man behind the project, Wang Jing made his money from telecoms and some commentators have questioned his lack of experience in major construction projects, plus receiving backing from the Chinese State could be difficult as they would be unwilling to upset Washington over a project which may not work or ever be profitable.

On paper there is not much to link Central America to China; six out of seven of the region’s countries recognise Taiwan, Costa Rica the only exception, making it the most politically unfriendly region in the world for Beijing. Central America is a relatively small market with only 42 million people and lacks the vital natural resources which have attracted Chinese investment to other parts of the globe.

Chinese Ambition

However, none of this has stopped intrepid Chinese companies investing in the region. In Honduras, Sinohydro are developing the Patuca III hydropower dam and China Development Bank have expressed interest in investing in the power sector.  In Costa Rica a recent visit by Chinese President Xi resulted in the promise of funding for infrastructure projects such as a national highway and a new oil refinery.

These investments underline growing Chinese influence at a time when the USA is perceived to be losing interest in the region, while these fears may be exaggerated, the US has had an influential hand in the region for over a century and years of investment and embedded political influence cannot be easily dismissed, but it is also clear that the Chinese will now be a force in the region.



Categories: China - Latin America, China Goes Global, Geo-Economics

Tags: , , , , , , , , , ,

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