South American Dragon

I’ve touched before on China’s growing in influence in South America. For the last few years a Chinese Billionaire, Wang Jing, has been planning on building a new canal through Nicaragua to compete with the Panama Canal. Now, it has finally broken ground and begun constructing roads to get heavy machinery into the jungle.

Now why does China want to build a new canal? The Panama Canal is much shorter, can already handle all but the largest of ships and is going through a $5 Billion dollar expansion.  Construction of a new canal in Nicaragua is drawing harsh criticism from the environmental community. By all accounts the damage to the ecosystem in Nicaragua, one of the world’s most diverse and sensitive ecosystems, would be severe.  The route would go through Lake Nicaragua, a massive inland fresh water lake. The mixing of salt water into the environment would damage habitats. Lake Nicaragua is only 50ft deep on average. The lake would need to be dredged to 90ft to be deep enough, exposing heavy metals in the silt to marine life. Besides destroying wildlife preserves up to 100,000 people may be displaced as China will effectively gain control over large swaths of the country to build the canal itself and support infrastructure. Many citizens who used to die hard supporters for President Daniel Ortega and fought for him in the 70s and 80s are outraged. It could possibly lead to civil war in Nicaragua.

So why are they building this canal? It doesn’t seem like the benefits outweigh the drawbacks. The canal is expected to cost $50 billion dollars and not be finished until 2020. Most analysts don’t even think it will be competitive enough with the Panama Canal to produce a profit. The canal would have to generate $5 Billion dollars a year to be productive. As of 2014 the Panama Canal only generates $2 billion a year. A small benefit to Nicaragua is they will build two deep water ports, of which the country has none, and will hopefully create 250,000 jobs.

But Nicaragua isn’t trying the build the canal, China is. So far it is not publically acknowledged that the Chinese government is supporting the construction, but it’s not unreasonable to think it is. In the past China proved I was willing to be the aggressor in the Sino-Indian war because the benefits of gained territory and showing the world they were the big kid on the block outweighed loss in political capital on the world stage. So if China thinks there is something important to gain they will sacrifice money and burn down a rain forest to get it.

Geopolitically, the canal would further strengthen China’s foothold in South America. China’s trade with the continent increased from $12 billion in 2000 to $250 billion in 2012. It is a major buyer of Venezuelan oil and gas and Brazilian iron ore. The Nicaraguan canal would transport super-tankers capable of carrying 2.3 million barrels of oil EACH, too big for Panama. China has been massively investing in South America in return for its natural resources power its economy. Being on the other side of the world, those resources get to China one of two ways; they go through the Panama or the Suez Canal. If China fights a conflict in the South China Sea the route through the Suez Canal would be closed. It’s not impossible to imagine that the US could close the Panama Canal to China if they wanted to. From this perspective I can slightly understand why China might want to build their own canal that can take even more materials than the Panama Canal. But to me it doesn’t seem worth the $50 billion dollars.

 

 

I think it’s a $50 billion dollar investment to buy a foot hold in South America. China has been selling arms to South American countries for years now and has become the 3^rd largest arms dealer in the world. China plans its strategy out years in advance. It has also recently announced that it intends to increase the size of its navy to 351 ships, larger than the US navy.  Building this canal gives them the excuse to build to deep water ports and the influence to station their growing navy there. This would allow them to project power right into the United State’s back yard. They can lock down the South China Sea with air power from the Senkaku Islands and land based missiles, and send most of their warships to South America, making them a true super power.