What is Unnecessary and Costs $40 Billion?

Around 100 years ago, the first cargo ship made its way from the Caribbean Sea to the Pacific Ocean by traveling through the newly completed Panama Canal. Pulitzer-prize winning author David McCullough claims that the 52-mile canal is “one of the supreme human achievements of all time, the culmination of a heroic dream of over four hundred years and more than twenty years of phenomenal effort and sacrifice.” The waterway has become one of the most significant trade routes in the world, with nearly $270 billion worth of goods being carried through the canal each year, reducing transit distances and costs by great amounts.

Chinese infrastructure firm HKND believes that more can be done. The firm is working with the Nicaraguan government to construct a 172-mile waterway connecting the Caribbean Sea and the Pacific Ocean. The projected cost of the Grand Nicaraguan Canal is estimated at over $40 billion, and that is a conservative forecast for its five-year construction. That does not even factor in the environmental cost of the endeavor, which includes the displacement of well over 30,000 people and the pollution of crucial bodies of water.

The proposed Grand Canal would cut through Lake Nicaragua, which provides many Nicaraguans with drinking water and would, according to environmental critics, “pollute the water with industrial chemicals and introduce destructive invasive plants and animals.” The current drought in Nicaragua exacerbates this water pollution, as the United Nations Office for the Coordination of Humanitarian Affairs has indicated that nearly 500,000 people in the Central American “Dry Corridor”, which includes the country, are facing severe food insecurity due to a lack of clean water. By polluting Lake Nicaragua, the Grand Canal would be cutting off a major supply of safe drinking water that many people increasingly depend on.

Supporters of the project claim that the Nicaragua Grand Canal will provide advantages over the Panama Canal. For instance, it will have wider lanes in order to allow for the “new generation” of extra-large cargo ships that are too wide for the current locks in Panama. Secondly, it will be 400 miles North of the Panama Canal, shaving an estimated 800 miles off of the transit from Asia to the Eastern Seaboard. However, the wider lanes argument is irrelevant for two reasons. For one, BBC World News reports that there are already operations under way in Panama to widen its canal, costing only $5.2 billion – just above ten percent of the cost of the Grand Nicaragua Canal, but without the same environmental impact. Additionally, the Wall Street Journal explains that demand for a pathway from the Pacific Ocean to the Gulf Coast for these extra-wide ships is small because many of the “ports cannot accommodate the largest container ships anyway”. As far as the difference in distance is concerned, the 400-mile separation is negligible in respect to time. Due to the decreased speed required to travel through canals, the 120-mile difference in canal length has a more significant lengthening effect on transit times than 400 – 800 miles at normal speeds.

Although it is a century old, the Panama Canal is still an intricate part of international trade, and the addition of the Nicaragua Grand Canal would cause more negative environmental externalities than benefits to the global market.

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