Overview

The Dream of a Nicaraguan Canal

The history of Nicaragua has been marked by the old dream of an interoceanic canal. Several historians point to 1567, when King Felipe II of Spain ordered the study of a canal through Nicaragua. In 1850, when “gold fever” was all the rage in the United States, efforts to transport cargo from one coast of the USA to the other became focused on the San Juan River and Lake Nicaragua, encouraging the US military to construct a channel through that route.

Nonetheless, the dream of such a canal evaporated, at least temporarily, when in 1902 the US Senate decided to construct the Panama Canal. Dr. Carlos Argüello G. mentioned an exhibition in the Nicaraguan Historical Institute, that as late as 1913, the US Ambassador to Nicaragua, George Weitzel, said: “In all cases of controversies between Nicaragua and Europe, Mexico, and Columbia, the true cause of the problem was the desire to control the interoceanic canal route.”

Later, Dr. Argüello stated that although the historic dispute between the Nicaraguan cities of León and Granada was in part fueled by the idea of a canal, the planned canal was to utilize Lake Nicaragua, which is more a lake of Grenada than a lake of León. Ambassador Weitzel said, “In summary, it can be said that the question of the canal is the principal theme of disturbances of the affairs of Nicaragua, whether they be international [or] internal, and this is not less certain by the fact that the route through Panama was chosen years ago…”

In the same statement, Dr. Argüello mentions several interesting and not well-known anecdotes about the canal, including:

  • As early as 1797, several of the fathers of Latin American independence – Francisco de Miranda among them – tried to obtain British support to change the special transit rights for the proposed canal;
  • In 1830 a Nicaraguan canal concession was granted to a group of businessmen from the Netherlands, headed by the King of Holland;
  • In 1848, Prince Louis Napoleon accepted a concession to construct the “Napoleon Canal of Nicaragua” and said, “In the New World there exists a country as superbly situated as Constantinople … We refer to the State of Nicaragua … which is destined to reach an extraordinary level of prosperity and greatness.”

All through the second half of the 19 th century there were many developments and false starts for a Nicaraguan canal, but in 1902 everything appeared to end with the decision to build the canal in Panama.

Fast forward to the 1990s, when the Panama Canal had been in operation for eight decades, but was rapidly reaching the point of saturation. A group of U.S. investors led by New York attorney and entrepreneur Don M. Bosco, had the foresight to pursue that early dream of an international trade route across Nicaragua in a modern form. Rather than the expense and environmental jeopardy that a water canal would incur, Mr. Bosco and the late Juan Manuel Rodriguez conceived the all container railroad service, since East-West container movements had grown at an average annual rate of 8% in the decade of the 1980’s and continued such growth into the 1990s. Other groups have tried to copy and modify this new approach . Since then, much has been said and written about various proposals to build and operate interoceanic canals through Nicaragua – both so-called “wet” canals, and “dry” canals. This information is at times confusing, with arguments both for and against the idea being advanced – sometimes backed by legitimate research, sometimes not.

Among these proposals, the Nicaraguan Interoceanic Railroad and Ports Project, being developed by the CANAL INTEROCEANICO DE NICARAGUA, S.A., (CINN), was first to appear with a concrete plan, officially termed the Nicaragua International Railroad and Ports Project, but known popularly as the “ Dry Canal”. CINN has pursued this proposal quietly but determinedly during the past 10 years, working with Nicaraguans to advance the proposal and create the legal foundation for such a large foreign investment in Nicaragua, amid a swirl of disinformation and efforts to undermine or stop the project from within and outside of Nicaragua.

CINN’s proposal consists of the construction of two deep-water ports, one in the Caribbean and the other in the Pacific, united by a railway to transport ocean freight containers along the approximately 377 km-long route.

CINN: Some Background

In view of the fact that CINN has spent over ten years developing this project, a review the chronology of the principal developments during that period is in order.

In the early 1990s, a group of private investors including Mr. Bosco investigated the possibility of building an interoceanic canal in Costa Rica to provide a viable alternative to the Panama Canal, which, according to international shipping industry experts, would soon reach saturation levels and, because of inherent design limitations, would be unable to accommodate the largest, newest generation of container vessels which Asian shipping companies had under construction (the “Post-Panamax” size vessels).

Moreover, it was thought that a “ Dry Canal– an overland rail route connecting two ports for the transport of containers -- represented the most efficient use of land, resources, funds and modern technology. In addition to providing the most economical way to transport cargo containers across the Central American isthmus, the Dry Canal would have a much less deleterious impact on the local environment and indigenous inhabitants than a highway or water canal, and would present far less complex engineering and construction issues.

However, while the Costa Rican effort was thwarted by senior advisors to then-President Jose Maria Figueres, by the early 1990s the political environment in Nicaragua had stabilized and foreign investors were encouraged to see the new opportunities in Nicaragua for business and investment during the administration of President Violeta Chamorro.

The Bosco group of investors decided to investigate the natural conditions and business conditions in Nicaragua in June 1994 and proposed were invited to move their Dry Canal project to Nicaraguan in late 1994.

In February 1995, CANAL INTEROCEANICO DE NICARAGUA, S.A. (CINN) was formed by the same group of investors who had developed the project in Costa Rica led by Mr. Bosco. CINN, formed under the laws of Nicaragua, set out to develop, build, and operate the Dry Canal of Nicaragua.

From the start, CINN committed itself to respecting Nicaragua’s sovereignty, environment and economy. Over the past ten years, CINN became a joint effort between the early nucleus U.S. investors who provided the initial funds and conceptual planning, and a larger international consortium of engineers, port designers, consulting and construction firms representing a diverse group of countries ( Belgium, Canada, U.K., USA, Hong Kong and China) which conducted studies and developed more detailed plans.

In 1995, the Nicaraguan government created a Joint Executive-Legislative Commission (Comisión Mixta), which formally received CINN’s proposal and signed an accord in March 1995. This event was significant in that it was the first incidence of Liberals and Sandinistas to jointly act and sign an agreement with foreign investors since the end of the civil war.

In October 1996 the Nicaraguan Government approved CINN’s Terms of Reference for the Feasibility Study of the Dry Canal Project.

In 1997, after a change in government, formal discussions took place to establish procedures for a Viability Study (Pre-Feasibility Study) which the new government asked CINN to conduct prior to the Feasibility Study in order to demonstrate that the Project could be realized.

On January 16, 1998, the Ministry of Transporation and Infrastructure directed a letter to the President of CINN, which stated that the Nicaraguan government recognized “that CINN has created and developed, in its view, a project that was worthy of being given the first option for construction.”

The same letter gave CINN a timeline for the completion of the Viability Study, which was completed by CINN on time, with the promise by the Government that upon successful completion of the Viability Study, the negotiations for CINN’s private concession contract would take place simultaneously with the Study and would be signed between the Government and CINN.

In January 1998, the Minister of Transportation and Infrastructure stated, “… CINN will continue to have the first option for the concession if the results of the Study determine the viability [of the Project] and the interests of the nation are preserved in all aspects.”

With these assurances CINN began the Viability Study, and at the end of March 1998, sent an international team of experts and planners representing engineering and construction firms from around the world, to Nicaragua. The plan was to ascertain the level of information available, meet with various Nicaraguan agency officials, and perform on-site surveys of the relevant sites. On return of this group to their respective countries, the process of writing and finalizing the Viability Study began. Unfortunately, the Government did not act on the draft concession contract CINN provided and negotiations did not start until after the completion of the Viability Study.

Meanwhile, Presidential Order No. 68-98, promulgated in Gazette No. 63 of April 1998, provided for the establishment of the Multi-Sectorial Commission, “to study the contract of concession of the Canal Interoceánico de Nicaragua (CINN) project …”

On August 27, 1998, CINN presented the results of the Viability Study to the President, the Vice President, and the Economic Cabinet of Nicaragua, four days before the established deadline. At the same time, CINN presented the document to the Minister of Transportation and Infrastructure, who chaired the Multi-Sectorial Commission, pursuant to the Presidential Order of April 1998.

With this, CINN preserved its primary option to develop the Dry Canal, and received clearance to move to the next stages of the project.

On October 26, 1998, in the Confrerence Hall of the Ministry of Transportation and Infrastructure, the Multi-Sectorial Commission was officially installed.

CINN continued negotiating the concession contract with the President’s Legal Advisors Office, and the President of the Republic approved and transmitted the contract and implementing legislation to the National Assembly recommending approval in July, 1998. Public hearings were held by the Commission on Transport and Infrastructure and the Commission on the Environment and Natural Resources, and both Commissions approved the President’s proposed legislation and accompanying concession contract.

In 2000, the plenary of the National Assembly passed CINN’s Concession Law in the form of a Decreto A.N. 2878. The Decreto A.N. 2878 was published in the Gaceta on May 16, 2001, and the implementing regulations entitled the “Normative Basica” was published in the Gaceta on December 5, 2001.

Since that time, CINN has undertaken the preliminary work to prepare the final TORs for the Feasibility Study, negotiated more detailed terms with the Nicaraguan Government and is waiting for the Nicaraguan Government to act in accordance with the law and regulations. CINN has continued to send engineers and environmental experts to the field and the port sites to gather information and continue with design and engineering work.

The Project

The fundamental objective of the Dry Canal project is to provide a new route for the transshipment of commercial container cargo between a deep water port on the Caribbean coast, and a second deep water port on the Atlantic coast, connected by high-speed rail.

The Dry Canal will initially support the movement of 730,000 containers/year, a number which will increase incrementally over time.

The projected cost of the Dry Canal project as conceived in the Viability Study is $2.64 Billion.

Two Port Complexes

CINN is developing plans for two port complexes: one on the Caribbean coast, in the vicinity of Monkey Point, Municipality of Bluefields, in the South Atlantic Autonomous Region (RAAS), and one on the Pacific coast, in the vicinity of Pié de Gigante, in the western Department of Rivas.

Both port complexes will be constructed to accommodate the latest and biggest generation of container vessels – the Post-Panamax class. To that end, the ports will be built to a depth of 16 meters, and initially, with a docking span of 810 meters. Each will be served by five cranes and a system of breakwaters to permit safe docking maneuvers.

Each port complex will be fitted with platforms for the surveillance and classification of containers and facilities for temporary storage. State-of-the-art security systems for the inspection and tracking of cargo containers will assure compliance with the highest precautionary standards in an age of heightened vigilance for terrorist and narco-trafficking activities.

In cooperation with international law enforcement agencies, including the U.S. Department of Homeland Security and its Nicaraguan counterparts, CINN is prepared to deploy the latest anti-terrorist technologies, including container screening, radio-frequency identification (RFID) and satellite tracking of container ships, to assure the transport of cargo safely to its destination – and to identify, isolate, and neutralize potential threats before they can reenter the stream of global commerce or enter US ports.

All basic port services, including water treatment plants and power plants, will form part of each port complex, as well as adjacent Free Trade Zone activities and businesses. Both port complexes will be self-contained mini-communities, served by administrative and operations offices, residential developments, information technology and telecommunications infrastructure, shopping, commissary, and restaurant facilities, medical clinics, commuter airports, and roadway access. To the extent possible, environmentally-conscious and “green” construction, engineering, waste-disposal and power-generation methods will be utilized, including the use of solar power, recycling, and renewable resources.

As part of its commitment to supporting Nicaragua’s economic development, CINN intends to using Nicaraguan personnel wherever possible, and will provide for the training of Nicaraguans to perform specialized jobs in port administration, surveillance and security, information technology, civil engineering, maintenance, logistics, and other areas vital to the operation of the port complexes and railway. In cooperation with Nicaraguan technical schools and universities, CINN will establish a Training Center, staffed by the most qualified instructors from Nicaragua and around the world, to ensure that Nicaraguans participate and qualify for technical and administrative positions in the Dry Canal operations.

A Maintenance and Repair Facility will serve each port complex, to perform safety inspections and equipment maintenance, and to supply logistics, parts, and expertise for both Dry Canal infrastructure and for docking vessels and their crews.

Interoceanic Railway

Spanning 377 kilometers from coast-to-coast, the CINN Interoceanic Railway (the “Railway”) will provide a fast, safe, and cost-effective link between the Atlantic and Pacific port complexes. In the first stage of construction, the Railway will be a single-track railroad route, with switching stations and lateral bypasses to accommodate the simultaneous movement of trains in both the east-west and west-east directions. Later expansion of the Railway will supplement the route with additional parallel tracks to serve the increased traffic levels expected after the first 2-3 years of operation of the Dry Canal.

Electro-diesel locomotive trains, designed to haul approximately 200 fully-loaded shipping containers, with an average speed of 70 miles//hr, will provide rapid and convenient transit of containers between the port complexes.

As currently planned, the Railway will cross the following Nicaraguan departments and municipalities, from west to east:

RIVAS DEPARTMENT : Tola, Rivas, San Juan del Sur, Belen, Buenos Aires, and Postal

CARAZO DEPARTMENT : Santa Teresa, La Paz de Carazo and El Rosario

GRANADA DEPARTMENT : Nanadaime, Diriomo, Diriá, and Granada

MASAYA DEPARTMENT : Niquinohomo, Catarina, Nandasmo, Masaya, and Tisma

MANAGUA DEPARTMENT : Tipitapa

BOACO DEPARTMENT : San Lorenzo

CHONTALES DEPARTMENT : Comalapa, Juigalpa, and Acopaya

RIO SAN JUAN DEPARTMENT : Morrito, El Almendro and San Miguelito

R.A.A.S .: Nueva Guinea and Bluefields


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Environmental Considerations

The Viability Study concluded in 1998 included a look at important environmental considerations. Currently, a more complex investigation of environmental issues is being performed in an in-depth Environmental Impact Study.

Significantly, the environmental questions under review are not exclusively restricted to the impact of the Project on the natural environment, but also its potential social, economic, cultural, historic, and archeological impacts. This strategy, worked out cooperatively by CINN, the Nicaraguan government, and representatives of indigenous populations of the impacted regions, takes into account the fact that every human activity, however insignificant it appears, has both positive and negative impacts on the environment as broadly conceived. What is critical is that the necessary measures are taken to mitigate the negative impacts, and that countervailing benefits are provided to the affected populations, with a view to promoting their development and economic well-being now and in the future.

In the Feasibility Study and Environmental Impact Study phases of the project, the following objectives are being pursued:

  • Identification of all significant impacts which could be financially very difficult or impossible to mitigate;
  • Development of a broad socio-economic overview of the project’s impacts, and a process for data collection and analysis;
  • Assessment of natural threats such as seismic activity and geo-engineering strategies for their mitigation;

Taking into account these broad objectives, the Environmental Impact Study is considering the following factors:

General Environmental Assessment

  • Physical and geological positioning of railway and other facilities
  • Climate considerations
  • Hyrological and water quality considerations
  • Maritime ecosystems
  • Coastal terrestrial ecosystems
  • Forests
  • Farmlands and agricultural issues
  • Wetlands

Additional Considerations

  • Protected areas and endangered species
  • Air quality
  • Noise and vibrations
  • Historical and archeological sites
  • Indigenous peoples
  • Cities, towns and population centers potentially impacted by the project

Natural Threats

  • Hurricanes and floods
  • Seismic disturbances
  • Volcanic activity
  • Forest fires

General Considerations

The Dry Canal project, as conceived by CINN, will provide great benefits to the economic development of Nicaragua and its population, as well as to the Nicaraguan state. CINN sees the following facts as important:

  • During the construction phase (approximately 5 years), about 20,000 new jobs will be created directly by the project;
  • An additional 60,000 new indirect jobs will be created to service and supply the project, the port complexes, and the Railway;
  • During the operation phase, some 6,000 permanent jobs will be directly provided by the CINN Dry Canal and its local subsidiaries;
  • The study, design, construction, and operation of the Dry Canal system will demand the participation of a large number of graduates of Nicaraguan technical schools and universities, and will contribute to building of Nicaragua’s competitive workforce of the future, as well as its resources in engineering, design and construction companies;
  • CINN expects the establishment of an International Financial Center in Nicaragua, which would promote global trade through the Dry Canal and facilitate international financial and import-export transaction worldwide.
With these considerations in mind, CINN expects the Dry Canal to provide substantial, lasting and far-reaching benefits to Nicaragua and, in general, to global trade and the international shipping industry. The Nicaraguan Dry Canal will be a new, efficient and cost-effective center of international trade, providing a viable and attractive alternative to both the Panama Canal and overland USA rail and trucking routes, and will at last fulfill the dream of so many forward-thinking leaders, navigators and merchants of centuries past – to make Nicaragua a hub of global commerce.