The Nicaragua Canal: Another blow for the United States?

Russia and China in the backyard of the United States?

Ortega has plans that could alter Latin America and the global political power play. Image Source: Tico Times

When in the beginnings of the 19th century the German explorer Alexander von Humboldt drafted his maps of the Central American isthmus, he contemplated about a connection between the Pacific and the Atlantic. About one hundred years later, the United States started constructing the Panama Canal after a military occupation of today´s Panama. Back then US- Secretary of State, John Hay, declared that henceforth the United States would have the right of exclusive economic control over one of the most important waterways of the globe. This imposed privilege was lost by the end of 1999, when after almost a decade Panama regained its sovereignty over the region surrounding the canal.

An equal setback is awaiting the crumbling regional hegemonic if plans of the left-minded Nicaraguan president Daniel Ortega will be implemented. Initiated by his predecessor, the popular president and former member of the leadership circle of the Sandinista Revolution, has promised his compañeros to end the enduring poverty in the country. In order to do so, he pushed an ambitious project through the national parliament to construct an even deeper and thus economically more efficient canal than the Panamanian neighbor. After years of negotiations, the Hong Kong Nicaragua Canal Development Investment Company (HKND) group received the concession to lead the constructions of the 40 billion dollar project. Alike the United States in the 20th century, HKND will also have the exclusive permission of regulating the usage of the Nicaragua Interoceanic Grand Canal for one hundred years. The economic alignment between China and Nicaragua comes as a surprise. Even though like- minded in the political orientation, the Middle Kingdom and Nicaragua generally do not enjoy close relations ever since Nicaragua recognized the Republic of China´s (Taiwan) independence in 1985.

As if the approaching Chinese influence to the traditional US backyard would not be enough, Foreign Minister Sergey Lavrov announced Russia´s political and military backup of the project, including the deployment of Russian troops for the protection of the construction sites. In Russia itself, the involvement in the construction remains disputed among intellectuals. Whereas Emil Dabagyan of the Latin America Institute of the Russian Scientific Academy noted that the United States would lose enormous grounds in the western hemisphere, the political scientist Konstantin Simonov underlined that the construction would benefit the Chinese rather than the Russian´s economic interests. Especially the Northern Passage in the Arctic would pose a viable alternative route for Russian trade flows.

In case the constructions will start as planned by the end of this year, it would indeed mean yet another loss of geopolitical influence of Washington. Especially in the last decades, the three BRIC members, Russia, China and Brazil have contested the Monroe Doctrine of exclusive American control in Latin America. Populist-nationalist leaders such as Daniel Ortega, Evo Morales in Bolivia or Rafael Correa in Ecuador turn towards investments from China, who contrary to the European Union do not attach any conditional to the trade agreements.

Given Nicaragua´s severe economic situation, the promising canal project raises hopes of connecting the country to the money flow. Accordingly, the Nicaraguan newspaper La Prensa quotes the Minister of the Cabinet, Paul Oquist, who expects a fifteen per cent rise of the national´s Gross Domestic Product (GDP) already in the upcoming year. Unfortunately, he failed to mention that the so-called trickle-down effect of the expected new revenues will most likely not reach the indigenous peoples who legally possess the ancient territory of the envisioned construction side. Still, it is expected that the legal appeal at the highest national court, which was brought forth by collective of the indigenous population, will most likely be in vain.



Simon schmitz

Simon schmitz

Junior Policy Analyst at InRA
Simon Schmitz was born in Germany and lived in Bolivia, the Netherlands and Austria. After completing his BA in European Studies at Maastricht University,Simon extended his perspective beyond the European continent and focused on the interconnections between Europe and Latin America. During his Erasmus Mundus Global Studies Master at the Universities of Leipzig and Vienna, he focused on challenges of public governance. Simon joins the Latin America department of the OECD in Paris and will continue to share his viewpoints on pressing issues on the Latin American continent and come up with unorthodox topics of regional and geopolitical relevance.
Simon schmitz


  1. […] in Latin America. As China increases its economic influence over the region, expanding trade and investing in key infrastructure projects, the US will have to adapt to shifting socioeconomic situations in the Americas. The rapprochement […]