Nicaragua Seemingly Moving Forward with Chinese-Backed Plan for Rival to Panama Canal

The Panama Canal, a shortcut from the Pacific to the Atlantic Ocean that saves an enormous amount of time for ships carrying intercontinental cargo, has had a 100-year monopoly on providing maritime transport short (and safer) passage from one side of the globe to the other.

It is currently in a state of improvement with an expansion that is expected to roughly double the capacity of vessels moving through it. This project was begun by the United States, which still enjoys a very close relationship with the Central American country that holds the land on which it sits. The close relationship is important not only for trade, but also for international security concerns.

"U.S.- Panama trade grew by roughly 20 percent to more than $10 billion in 2012 and has only continued to increase since the entry into force of the U.S.-Panama Trade Promotion Agreement (TPA) in October 2012," noted a White House press release on Biden's meeting with Panamanian officials. "Panama's strategic location as a major shipping route - and its expansion of the Panama Canal - will only enhance the importance of the U.S.-Panama trade and the jobs it will support in both the United States and Panama."

But there is competition on the way in Panama's neighborhood. Nicaragua is in the process of trying to lay the groundwork for another canal, one that it says will be able to accommodate ships larger than even the post-improvement Panama Canal will be able to.

"They carry more cargo for about the same amount of money per mile," says Rodney McFadden of George Mason University in an interview with Voice of America. "They are much easier on the environment, and they increase trade. "

McFadden tells VOA that the proposed alternative canal through Nicaragua might be able to double the amount of cargo a ship can carry through even the improved canal that is being constructed currently in Panama.

Financing the effort is China-based HK Nicaragua Canal Development Investment Co. Ltd. According to Reflejos, experts believe the project would cost $40 billion, take 11 years to complete and involve digging out 130 miles of waterway, which leaves many skeptical that the effort will ever materialize.

"I don't think the canal will ever be built," Panamanian Foreign Minister Fernando Nunez Fabrega said in October according to the Christian Science Monitor, adding that it will have to compete financially with a newly-improved Panama Canal that is expected to be operating in 2015.

"Can you imagine getting into a pricing war? When you say, 'We'll charge a dollar a ton,' and the guy next to you says, 'I'll charge 10 cents'?"