Setback for Xi's China as Nicaragua drops plan to build Atlantic-Pacific canal

In a major setback for Chinese leader Xi Jinping's objective to expand Beijing's pervasive footprint in Latin America, Nicaragua has cancelled a controversial plan to build a canal linking the Atlantic and the Pacific nearly a decade after it first broke ground. 

Critics had flagged the project as a danger to the environment and raised concerns related to the mass displacement of local communities. 

A symbolic "ground-breaking" of the canal had taken place in 2014. But no work was done on the canal that was to link Nicaragua’s Atlantic and Pacific coasts.

While workers did break ground on access roads, the digging of the waterway never started. 

Besides, thousands of Nicaraguan farmers had protested against land seizures meant to create a route for the government-backed project.

Why is it significant?

The project, had it achieved fruition, would have dwarfed the Panama Canal, the biggest transit route in the Americas. 

But the canal would have bisected Lake Nicaragua, Central America’s largest lake while leading to the forcible displacement of an estimated 120,000 people, including Rama and Creole communities from protected Indigenous territories on the Caribbean coast.

The proposed $50bn, 172-mile canal across this Central American country was initially viewed as a joke due to the costs involved and the way it would turn the conventional Nicaraguan lifelines upside down. 

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However, President Daniel Ortega’s government claimed that the canal would create tens of thousands of jobs. 

China's role in the Nicaragua canal building

The 50-year canal concession was granted to the Hong Kong-based company HK Nicaragua Canal Development Investment Company, owned by the Chinese businessman Wang Jing.

But even Wang Jing's fortunes plummeted during China's 2015 stock market crisis when he reportedly lost up to 85 per cent of his wealth.

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Xi Jinping's China has developed regional headquarters of 18 Chinese companies in the Colon Free Zone in Panama, the largest free-trade zone in the Western Hemisphere. With the Nicaragua canal, it intended to expand its pervasive economic presence in the region.