Nicaragua signs $40bn deal with HKND Group to build Panama Canal rival

16 June 2013 (Last Updated June 16th, 2013 18:30)

The Nicaraguan government has signed an agreement with Chinese firm Hong Kong Nicaragua Canal Development Investment (HKND Group) to build a shipping channel across Nicaragua that would act as an alternative to the Panama Canal.

The Nicaraguan government has signed an agreement with Chinese firm Hong Kong Nicaragua Canal Development Investment (HKND Group) to build a shipping channel across Nicaragua that would act as an alternative to the Panama Canal.

The move follows the National Assembly’s agreement to grant the HKND Group a 50-year concession period to plan, design, build and operate the canal.

The 209km waterway would connect the Pacific Ocean and Caribbean Sea, and is expected to take 11 years to complete, generating around 40,000 construction jobs.

HKND Group chairman Wang Jing said that global shipping demands the efficiency and cost competitiveness of increasingly large ships, and the company believes the project will serve that need.

"Central America is at the center of north-south and east-west global trade flows, and we believe Nicaragua provides the perfect location for a new international shipping and logistics hub," Jing said.

According to the Nicaraguan government, the proposed $40bn canal project could increase the country’s gross domestic product (GDP) by up to 15%.

The project will also include plans for port projects, two free-trade zones, a railway, an oil pipeline and airports.

"The move follows the National Assembly’s agreement to grant the HKND Group a 50-year concession period to plan, design, build and operate the canal."

Nicaraguan president Daniel Ortega was quoted by the International Business Times as saying that the proposed canal will pass through Lake Nicaragua and not further south alongside the San Juan River as previous plans have stated.

According to Ortega, the Nicaraguan Canal will be deeper than the Panama Canal by 60m in places, nearly three times as long and will be capable of accommodating vessels twice as large.

Work on the canal is scheduled to commence following the completion of feasibility studies, which are expected to be completed by 2015.

HKND Group’s concession is expected to be extended for another 50 years once the canal is operational and the Nicaraguan government would get a minority share of the profits generated by the canal.

According to HKND Group, the volume of trade on the Nicaragua Canal would increase by 240% by 2030, while the total value of goods transiting the combined Nicaragua and Panama canals is expected to reach $1.4 trillion.

China Railway Construction has been appointed to conduct the initial technical feasibility study while McKinsey will provide fact-based research and analysis.