Nicaragua's Canal – the environmental and economic arguments

Tortilla con Sal, 20 de noviembre 2015—the-Environ…
With the approval by Nicaraguan government last November 5th of the Environmental and Social Impact Assessment (ESIA) study, the project of the Inter-oceanic Canal will enter its phase of design and execution. Initial construction will begin by the end of this year of the Brito port facilities on Nicaragua’s Pacific Coast and, by the end of 2016, of the projects’ two gigantic locks. The overall construction is one of the largest civil engineering endeavors ever undertaken anywhere in the world and is expected to be finished by the year 2021.
Among many other things, the ESIA study bears out the fundamental argument in favor of the Canal. Namely, Nicaragua is already suffering catastrophic environmental depredation and water management failures as a result of the country’s impoverishment. Thus, only a strategic development project like the Canal with its huge reforestation component and an existential need for sustainable water management will save Nicaragua from the environmental destruction already in train.
Both Western corporate and alternative media have given extensive coverage to environmental criticisms of Nicaragua’s Canal. However, they have paid little attention to well-grounded and critical analysis of the many unscientific and ideologically driven claims that the Canal will inevitably end in catastrophe. Underlying these phoney environmentalist claims is an outright disregard of the highly participatory and painstaking processes of evaluation and appraisal in Nicaragua that have contributed to the still developing final profile of this enormous undertaking.
For example:

  • The idea of an inter-oceanic Canal across Nicaragua is not new and can be traced back to the Spanish colonization of the country back in the 1500’s. In the 20th century, Nicaragua was invaded several times to prevent the possibility of an independent, non US-controlled Canal project. In 1927, General Augusto Sandino proposed constructing the Canal with the participation of all the Latin American countries. The Canal has remained a dream for most Nicaraguans ever since. By 2006, the government of Liberal President Enrique Bolaños already had well advanced plans for a Nicaraguan interoceanic Canal. When the Sandinistas return to power in 2007, the contacts and efforts in order to materialize such a dream intensified.
  • In June 2012, the National Assembly passed the law creating the National Interoceanic Canal Authority. On the basis of a six-month pre-feasibility study by the Dutch Ecorys company, President Daniel Ortega announced in May 2013 that concrete agreements for the construction of an Inter-oceanic Canal had been reached with a Chinese Company. In June the same year, Nicaragua’s National Assembly ratified the agreement between the government and HKND Group. A year later, in June 2014, the firm McKinsey & Co. completed the study of commercial and business feasibility of the Canal project. In December that year, the Chinese company China Railway Siyuan Survey and Design Group delivered the technical feasibility study.
  • On May 2015, the London-based company Environmental Resources Management (ERM) delivered to the Nicaraguan Government the ESIA study which has been revised and discussed for almost six months in nine public meetings with 3,000 representatives of communities along the route of the Canal, including entrepreneurs, media, university students, labor representatives, religious leaders, environmentalists and other interested groups. The study’s recommendations and the input from those meetings were taken very seriously by the Nicaraguan government and HKND, resulting in a number of important adjustments to the project. Finally, on November this year, the ESIA was approved by the government and the project was given the environmental license to start the phase of design and construction leading to its completion by the year 2021.

The ESIA is a thorough study of Nicaragua’s environmental and socio-economic situation, as well as a critical analysis of the Canal project: It runs to 14 volumes with over 11,000 pages covering a comprehensive range of subjects and disciplines, ranging from geology and soil composition to marine and freshwater ecological systems to community health systems, cultural heritage, local economy and employment. The thoroughness of the study and the seriousness of the task motivated Nicaragua’s authorities to take more time than had initially been planned in order to discuss ESIA’s results and recommendations.
The ESIA study found out that the Canal will have a positive net impact on Nicaragua’s environment and society provided that the project follows ERM’s recommendations, based on international standards and reached in common agreement with the government. The ESIA confirmed that environmental deterioration in Nicaragua today and for the coming decades, if nothing is done, will be dramatic.
As this graphic shows, deforestation in the country has been going on at an alarming rate. Environmental experts agree that if no meaningful action is taken most forest areas in Southern Nicaragua will have disappeared in 15 years and precious natural reserves will be destroyed.
The quality of the water in the Lake of Nicaragua is already deteriorating because of human activity and accelerating deforestation. On the other hand, the Canal will also imply a number of risks, with about 5 billion cubic meters of excavated material (the largest civil earth moving operation in history), of which 715 million m3 of sediments will be excavated from the Lake itself.
The construction of the Canal requires an ambitious program of reforestation of areas bordering the lake. But this is not the only planned measure. In terms of water management, for example, the design of the Canal and its locks contemplate no net loss of water from the Lake of Nicaragua and incorporate technologies guaranteeing that no sea water will mix with the lake’s freshwater.
The locks are located in such a way that they would capture flow from a watershed (Punta Gorda) that would otherwise flow out to the Caribbean, plus supplemental water from a reservoir (Agua Zarca). In addition, the locks have a redundancy system to recycle 80% of the water used in the locks operation. A 395 km2 artificial lake, known as Lake Atlanta, will prevent water from the Canal flooding the Bluefield Bay watershed.
routeA battery of measures are recommended to optimize mitigation of the Canal’s environmental impact, ranging from state-of-the-art lighting systems that minimize disruptions for wild life to relocation at both ends of the Canal in order to minimize the impact on an important mangrove ecosystem on the Pacific Coast while also creating one extensive homogeneous protected area on the Caribbean coast (called the Designated Protection Area) by connecting existing protected areas and adding new ones.
The chosen route guarantees that no more than 6,800 families (27,000 people) will have to be relocated because of the Canal. Of these people, only 25 families belong to an indigenous community. According to ESIA, this route is the only one able to adequately mitigate and offset the various impacts and also meet international standards.
In spite of HKND’s efforts to minimize impacts, some major adverse consequences may be unavoidable. Among these according to the ESIA are:

  • Loss of some intact primary and secondary rain forest;
  • Fragmentation of the Mesoamerican Biological Corridor, with the Canal acting as a barrier to animal movement and gene flow, causing isolation of populations;
  • Conversion of the ecologically diverse Río Punta Gorda from a natural free flowing river to a system of locks, Canals, and reservoirs;
  • Loss of some nesting, foraging, and migratory habitat for endangered sea turtles;
  • Loss of individuals among several Critically Endangered and Endangered species;
  • Introduction of invasive species into the Río Punta Gorda river system;
  • Increased sediment loads into the Pacific Ocean, Caribbean Sea, and Lake Nicaragua during construction;
  • Physical division of Nicaragua into areas north and south of the Canal, with associated reductions in access and connectivity;
  • Physical and economic displacement of around 27,000 people; and
  • Displacement of the last Rama village that still speaks the native language.

However, these undeniable negative factors have to be weighed against the important probable benefits. The Canal will categorically arrest and reverse existing environmental depredation, mainly, but not only, in relation to forest conservation and water management. But the economic and social benefits for the project are also imperative for the well being of Nicaragua’s people.
Initially a relatively minor benefit, but one accumulating much more significantly over the years, will be increased State revenues, both direct (a concession fee of US$10 million/ year for the first 10 years of the Project) and indirect (increases in personal income taxes, business taxes, sales taxes, other tax revenues stemming from an increase in Project-related spin-off employment and business activity). Also, an overall positive change in Nicaragua’s balance of payments can be expected in the medium and long term, similar to those in relation to the widening of the Panama Canal.
Other expected positive economic effects on the country’s economy as a whole are increases in economic production, business diversity, and markets associated with the project’s expenditure (50 billion dollars); an estimated of 25,000 jobs for Nicaraguans during the 5 year construction period plus nearly 4,000 workers for operations in the first year increasing over forthcoming decades to around 14,000 jobs by 2070. The Canal will progressively increase local workers’ personal incomes as they acquire, develop and consolidate new skills and experience. Nicaraguan government projections suggest significantly reduced overall poverty, halving extreme poverty during the first years of the construction of the Canal and eliminating it completely following the project’s completion.
In order to assess the project’s costs and benefits, ESIA worked on five scenarios:

  • Without a Canal, if present trends were to continue, ERM considers that the Indio Maiz Biological Reserve and the Mesoamerican Biological Corridor (MBC) would be lost within a couple of decades and Lake Nicaragua’s water quality would continue to degrade. On the social side, most people living in the East Canal area would likely remain in subsistence lifestyle while people living in the West Canal area would maintain their existing lifestyle. Nationally, the country would continue to struggle economically with many people continuing to live at subsistence level.
  • In the case of a Canal built to international standards, the project would result in increased protection of the Designated Preservation Area and the maintenance of Lake Nicaragua, although risks of spills from shipping and introduction of invasive species would still exist. Socially, the negative impacts of the Canal would be mitigated and both those directly affected by the construction of the Canal and the wider population would be better off. Economically, the country’s prosperity would significantly improve as a result of the project.
  • If the Canal met international standards but failed to meet economic forecasts, it would be difficult to implement the environmental commitments, or mitigate the problems associated with shipping and increased risk of accidents as fewer resources would be available for maintenance. Socially, living conditions for those affected by the project would improve, but the benefits for the larger population would not materialize. Economically, Nicaragua would benefit from construction expenditures, but lose the Proejct’s major long-term indirect and induced benefits.
  • If the Canal were to fail to meet international standards, ERM considers that the degradation of the Lake of Nicaragua and the tropical rainforests would occur. The social impacts would be significant, leading to social unrest and a loss of the project’s social legitimacy. The environmental and social costs would undermine the economic benefits of the Canal.
  • If the Canal construction were not completed, the most sensitive habitats on the Caribbean and the Pacific, and possibly the Lake itself, would be affected. Besides, there would be no resources to fund the watershed management and to enforce the Designated Protection Area. Social goals would not be achieved and relocation would be partial. Environmental damage may affect the livelihood of people in the project area. Economically, although some benefits may occur from whatever constructions may be made, the Government would be left with the costs of restoring disturbed areas, with an overall loss of resources for the country.

Out of these possible scenarios, no well-grounded viable alternative has been suggested to the construction of the Canal that might solve the existing catastrophic environmental trends and Nicaragua’s intractable impoverishment. Proposals such as Nicaraguan environmentalist Jaime Incer Barquero’s to export fresh water from the Lake of Nicaragua in order to develop the country do not stand up to even superficial analysis. Barquero himself, now so highly critical of the Canal, was one of the leading proponents of the Canal project developed under the government of President Enrique Bolaños.
ERM’s experts conclude, “The Panama Canal is probably the best example of the benefits a well-executed Canal project can offer to Nicaragua, because of its proximity and similar climate, natural habitat, and social context. In addition to the Canal’s contributions to the economy and social conditions in Panama, long-term ecological studies have revealed a diverse flora and fauna along the Panama Canal, which can be attributed to the large contiguous band of forest that has been protected and restored along the Canal, at a much higher rate than elsewhere in Panama (Condit et. al. 2001)”.
In summary, the Canal will be a positive project so long as it is implemented well to international standards, as both the Nicaraguan government and HKND have demonstrated repeatedly and clearly they are committed to doing. The 11,000 page ESIA study constitutes a much better informed opinion than any of those profusely spread by most Western corporate and alternative media. The study’s often highly critical opinion has been welcomed both by the Nicaraguan authorities and by HKND company because it clarifies the challenges to be surmounted in order for the Canal project to succeed. As HKND’s main adviser and expert Bill Wilder says, “It is illogical to think that the Canal does not bring along any benefits”. Looking at Nicaragua’s prospects without the implementation of the Canal and its sub-projects, Wilder is putting things mildly.

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