Michael Busch

Since late December, when preliminary work on a transoceanic canal traversing Nicaragua began, there’s been little cause for optimism concerning the project’s future. The Chinese telecom executive spearheading the endeavor has no experience in large-scale construction, or any construction for that matter. Local populations directly affected by the proposed canal have taken to the streets repeatedly over the last six months to protest construction—demonstrations which have turned violent on several occasions. And environmentalists have been sounding the alarm about the disastrous ecological costs the project would exact.

Yet you’d think the canal was a done deal from the way some analysts are talking about it. A recent piece in the Diplomat is characteristic of this trend. After a quick tour through the details of the controversy and questions surrounding the proposed canal, the article jumps to the geopolitical implications of a completed canal. 

Clearly, this is a challenge to traditional U.S. pre-eminence in the Western Hemisphere, even if it remains uncertain whether it is a deliberate response to the U.S. rebalance to Asia. Given that the U.S. has military bases near China, there is strategic value for China in establishing its own military presence in Central America, above and beyond the economic considerations.

How should the U.S. respond? It could rethink its current focus on Asia and the Middle East, reorienting back to Latin America to counter China’s growing presence there.

It could also do nothing. After all, the canal will generate considerable trade and even foster potentially positive competition with Panama. International commerce overall will benefit and the U.S. will profit from this. Yet Washington also needs to take into consideration the military element. The canal may attract Chinese military vessels looking to protect Chinese commercial interests.

Speculation of this sort ignores the more immediate signs that the canal may never even reach the final stages of completion. The project was thrown into deeper doubt this week as the scope of China’s financial troubles became clear, and market panic briefly set in. While a full-blown economic crisis is unlikely to swallow China up, a hit to the country’s growth could well create adverse effects in economies around the world—especially those with close economic ties to Beijing.  

Whether China’s economic troubles will have immediate impact on the canal’s progress is anyone’s guess. As Isabel Hilton noted in the Guardian, “China aims to export its over-capacity through grand infrastructure projects around the world, but many of the proposed host countries are vulnerable to political and economic hazards.” And this is to say nothing of China’s difficulties in meeting ambitious construction deadlines. 

The Baha Mar boondoggle offers a good example. The Chinese mega-project in the Bahamas, which tied up over $3.5 billion in investment, went under this past week when the lead developers filed for bankruptcy. Baha Mar, the Wall Street Journal reports, “was supposed to be a showpiece that would help China’s largest construction company win lucrative resort business across the U.S.” 

Instead, a series of missed deadlines, a bankruptcy filing and bitter clashes with the developer over pay to imported Chinese workers are turning the flashy development for the global elite into a quagmire, one that could complicate China State Construction Engineering Corp.’s ability to win new business in the region and the U.S. 

If Baha Mar and Chinese market troubles are anything to go by, the future of the Nicararguan canal—which was never a sure thing from the jump—is anything but certain. Instead of speculating on how the canal could tip the balance of great power politics, a more useful discussion could be had on what will happen when construction grinds to a halt, and project plans are scrapped or dragged out years past the original deadline. 

Forget the geopolitical repercussions; the consequences will be felt most acutely at the local level. Investors might take a drubbing if the project falls through, but they would still be able to walk away from a partly-built canal. Nicaraguans, however—suddenly stuck with significant job losses, a ruined environment and possibly no place to call home—would be left holding the bag.    

Michael Busch is Senior Editor at Warscapes. Follow him on Twitter at @michaelkbusch.

Image via Business Insider.