Saturday, March 07, 2015

Stratfor Contributor
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How a Chinese Billionaire Got Invested in Nicaragua's Canal Plan

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Furthermore, though Beijing has backed many economic projects in Latin America and has special economic and political relations with countries such as Venezuela, Chinese leaders are cautious about engaging in a project that clearly appears to challenge U.S. interests in the region — particularly given the high cost and minimal rewards of the Nicaraguan canal. Wang himself purportedly tried to gain U.S. backing and investment through contact with former U.S. officials, but found little support. Publicly serving U.S. officials have actually raised concerns about the project, though primarily for environmental reasons.
One of the reasons the Chinese government was cautious was the belief that the canal project would not be viable without U.S. support, or at least without avoiding U.S. opposition. With Beijing facing difficulties at home regarding its overall economy and the parallel anti-corruption campaign and consolidation of power under President Xi Jinping, there is little appetite among China’s leaders to pick a fight with the United States in its own backyard over a project that appears to bring little gain while being fraught with political risk.
According to some people familiar with the situation, Wang is now having second thoughts about the entire project as well. Having already thrown in some $5 billion, however, it would be difficult for Wang and HKND to back out. Without the more active backing of the Chinese government, or at least a surge in interest by potential partners, HKND is likely to find it increasingly difficult to raise the money for the canal project. Environmental opposition will probably grow and may draw in international organizations to support the local population. And this does not even consider some of the physical obstacles of such a massive undertaking.
The Nicaraguan government has based a lot of its future economic projections on the projects related to the canal construction and affiliated investments, and that is riding on Wang’s company and his ability to raise the funds and support necessary to bring the project to completion. But by most accounts, Wang does not have the political or economic backing of Beijing, certainly not formally and perhaps not at all. Perhaps the attention will shift to the affiliated development — the ports, the free trade zones and the tourism facilities. But whether the entirety of the project itself is ultimately completed, the renewed attention to a Nicaraguan canal, and to Nicaragua itself, emphasizes the changes in international attention to areas of the world picking up as the next manufacturing hubs.

This article was originally published by Stratfor, a leading global intelligence and advisory firm based in Austin, Texas.
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