Friday, January 17, 2014

A Pipe Dream or the Key to Ending U.S. Hegemony in Latin America?

Quietly, news emerged this past June about a deal to build a larger-than-life project that could transform the country of Nicaragua.  If preliminary reports are true, plans are in the works in Central America that would build a canal more than three times as long as the Panama Canal and fit massive cargo ships twice as large.  While the project is still in the preliminary stages and would need final approval, what was announced in June has the potential to transform not just this long suffering country, but the dynamics of global commerce.

The Sandinista government of Nicaragua, led by Daniel Ortega, has agreed in principal to grant the rights to build a canal crossing through the country from Pacific to Atlantic Ocean to a Chinese businessman named Wang Jin, head of the HKND Group.  The price tag has been set at $40 billion, which would be paid for entirely by Wang, who promises to get the job done in 5 years.    

In return, Nicaragua would receive $10 million per year and an equity stake in the canal that would eventually result in 100% ownership in 100 years.  Ortega has approved the plan, and in June it was approved by the National Assembly.  

"Although both Mr. Wang and President Daniel Ortega insist that the project will go ahead, people who have worked with HKND say it has more of an option to build than an obligation.  In effect, the cost of the option is the tens of millions of dollars that Mr. Wang is expected to pay from his own pocket to find out which route is most physically and financially feasible," says The Economist.

After this, many questions remain.  Is this realistic or little more than a pipe dream?   Is Wang truly an independent businessman, or is he serving partially-or entirely-as a front for the government in Beijing?  

"With an unfathomable price tag, an unchartered route, unknown environmental consequences, unidentified financial backers, unclear ties to the Chinese government, and an unproven company headed by an unfamiliar man of undetermined experience, Nicaragua's private Chinese canal project has more than a few people asking 什麼赫克," writes Tim Rogers.

But reportedly British, Australian, American and other foreign consultants and engineers are at work looking at the environmental and social impacts and consideration of feasibility.  

It is easy to see the appeal for Nicaragua.  The idea of a canal to compete with Panama's has long been a dream of rapid economic development.  The government has numbers it claims to back up its assertion that the canal will benefit the country's citizens: 403,583 out of poverty by 2018; 353,935 people from extreme poverty; a drop from 42%  to 31.35% over the next five years.

One of the reasons the Nicaraguan government has to be optimistic is the expected problems the Panama Canal will have with the next generation of container ships.  Despite Panama's recent expansion of its canal these jumbo ships are expected to be to wide to pass through it.

There is also the strategic importance of the canal as an alternative to Panama's canal.  The U.S. obsession with the Panama canal is well know.  The U.S. armed guerillas in what is now Panama to fight for separation from Colombia.  Once accomplished, the U.S. said: "Thank you very much, we'll take it from here."  They then proceeded to establish the Panama Canal Zone and oversee the construction of the canal, which would be owned and operated by the U.S. for the rest of the century.

The U.S. military remained in the country until the turnover of ownership to the local government in 1999, 10 years after mounting a terrorist assault that killed more people than 9/11 to oust a former CIA asset, Manuel Noriega, and install a pro-business candidate who had received campaign funds from the U.S. To this day, the U.S. military maintains bases in Panama.

There are no definitive links between Wang and his government.  But it is not hard to see why Beijing would be compelled by a canal to compete against Panama's.

"China has never believed that the Panama Canal and the Panamanian Canal Authority are independent of U.S. influence, said R. Evan Ellis, author of the book "China in Latin America. "There's a certain value to [Nicaragua] having their own canal."

"China's role in the development of this canal is partly about expanding its global trade.  But it's also a way for China to push back against Washington's militarized 'Pacific Pivot,' as well as the U.S. drive to establish a Trans-Pacific Strategic Economic Partnership (commonly shortened to Trans-Pacific Partnership, or TPP) that seeks to contain China's global economic growth," writes Arnie Saiki.

Despite the cloud of secrecy surrounding the TPP, a chapter of which leaked to Wikileaks, who revealed its environmental clauses to be "a toothless public relations exercise", it is clear that it is not really about free trade at all.

"If negotiators created a genuine free-trade regime that put the public interest first, with the views of ordinary citizens given at least as much weight as those of corporate lobbyists, I might be optimistic that what would emerge would strengthen the economy and improve social well-being.  The reality, however, is that we have a mangled trade regime that puts corporate interests first, and a process of negotiations that is undemocratic and non-transparent," says Nobel Prize-winning economist Joseph Stiglitz.   

While China would have little incentive to scrap its regulations and benefits for state-owned enterprises to benefit U.S. investors and patent holders, a way around the trade agreement would seem extremely appealing.  Could this be what they have found, if as some have speculated Mr. Wang is indeed representing the Chinese government?

"A China-led Nicaragua Canal challenges Washington's 150-year-old claim of military and economic hegemony in the Western Hemisphere as outlined in the Monroe Doctrine.  This rise of the trans-global BRICS economy, coupled with a new inter-oceanic canal that the United States has no jurisdiction over, means that the United States has been, at this moment, out-mauevered by China."

A direct route controlled by China from Beijing to Brazil would remove a huge obstacle to trade in what the U.S. has always considered an extension of its own territory.  It would also open up easy avenues of trade with other Latin American nations.  This could drastically alter the status quo.

As one of the worst victims in the U.S.'s long and violent history of hegemony, Nicaragua should rightfully distrust the United States.  Since winning its case against the United States in the World Court in 1984 - the U.S. was found guilty of encouraging human rights violations, violation another country's sovereignty, using force against another country and mining its harbors - the verdict of reparations from the U.S. to Nicaragua has been mercilessly ignored.

Nicaragua has subsisted, barely, by succumbing to foreign investment and doing as they were told, privatizing domestic business and exporting without imposing restrictions against foreign imports. The demands imposed on the country have had the effect of "virtually eliminating much of what remains of health and welfare services, while infant mortality rises along with disease, malnutrition, and starvation, offering new opportunities to condemn the 'economic mismanagement' of the despised enemy," writes Noam Chomsky.

It is largely because of the United States that Nicaragua finds itself with such widespread poverty, not to mention the emotional scars of the prolonged civil war. If Nicaragua is able to develop their country and its resources without U.S. involvement, this would be a tremendous victory to the Nicaraguan people and the Sandinistas.

But it seems at this early stage of the canal project, as well as the TPP, that no one outside the governments involved can truly understand what outsiders can only speculate about.

In this global game of chess, it seems that for once, the U.S. government might have been outmaneuvered. Hopefully it will be for the benefit of a nation who well deserves the rewards this would bring them.