The New Nicaragua Canal: Chinese Strategic Options Ever-Closer to US Shores
Dr. R. Evan Ellis[1]
Dr. Evan Ellis is a research professor of Latin American Studies at the U.S. Army War College Strategic Studies Institute, with a focus on the region’s relationships with China and other non-Western Hemisphere actors, as well as transnational organized crime and populism in the region.
The new Nicaragua canal and other Chinese strategic projects in Central America create options that could be exploited to support the People’s Republic of China’s strategic objectives, both in times of peace and war, in ways harmful to host countries and the region.
In November 2024, at the 17th Annual China-Latin America Business Summit hosted in Managua, Nicaragua, the government of Daniel Ortega announced plans for a new interoceanic canal, with the initial feasibility study to be performed by the PRC-based firm CAMC Engineering. Although it is doubtful that the canal will be fully built, it is the latest of a growing list of projects that give PRC personnel latitude to operate extensively across Nicaragua with considerable freedom and little external oversight. These compliment a similarly worrisome growth of PRC personnel and projects in neighboring El Salvador and Honduras that are political and strategic in nature, and which will likely generate more costs than value for the countries involved. The new Nicaragua canal and the other projects generate expanding options for the PRC that can be exploited to support their strategic objectives in both peacetime and wartime, under permissive conditions with limited transparency, in ways ultimately prejudicial to the host countries and the region.
The new Nicaragua Canal will almost certainly not be built. The new, equally deep but much longer $64.5 billion, 445-mile proposed canal has an estimated price $24.5 billion greater than its predecessor project, whose champion, shady PLA-connected Chinese telecommunications billionaire Wang Jing ultimately failed to attract enough investment to begin serious work. Nicaragua today is even a less attractive place to sink a $64.5 billion immovable investment than it was then, with even greater sanctions on Nicaragua likely from the incoming Trump administration and with even less reason to believe in the Ortega regime’s juridical impartiality. The flaws of the first design, including uncompetitive transit charges required to pay off the massive quantity of money to be loaned, as well as severe thruput restrictions due to limited options for two-way traffic of very large vessels, have only been made worse by the length and cost of the second canal.
Despite such problems, the Ortega government appears committed to authorizing some type of significant new Chinese construction activity in the name of a canal. They officially rescinded the development authority given to Wang Jing’s company HKND for the first canal, to legally clear the way to grant rights to a successor. They also named en established PRC-based company, CAMC Engineering, to do the feasibility study. Given the likely lack of serious interest from Western investors, it is also notable that for the new canal, unlike with Wang Jing’s canal project a decade ago, the Ortega government has diplomatic relations with the PRC. Nonetheless, in the wake of China’s own economic problems, and problems with funding hundreds of billions of dollars in economically unprofitable infrastructure projects elsewhere, the PRC is unlikely to fund digging a 445 kilometer long, 27 meter deep trench across Nicaragua, unless it has strong strategic reasons for doing so, and preferably, can ensure the Ortega government pays for its efforts.
Even if the PRC does not construct a fully-functioning $64.5 billion canal across Nicaragua, the project provides for bringing personnel and equipment into the country under non-transparent conditions. It is part of a broader pattern of PRC strategic infrastructure and other projects in the country, most in the vicinity of the proposed new canal route. These include expansion of the capabilities of the Punta Huete airport, leveraging a massive runway built by the Soviet Union during the Cold War to receive its largest bombers. PRC projects in Nicaragua also include upgrades to a costal road network, as well as roads from Guanacaiste to Rivas, a rail line from Managua to Granada on the northwest coast of Lake Cocibolca, and a possible much longer rail line to Bluefields designated Atlantic coast port for the proposed new canal.
Beyond transportation construction, announced activities bringing Chinese workers and equipment to Nicaragua include the “El Barrio” wind farm, the Mojolka and Tumarin hydroelectric facilities, and multiple mining concessions, including those on the Caribbean coast given to PRC-based Xinxin Linze. Expanding Chinese presence is also reinforced by PRC-Nicaragua free trade agreement that has brought an avalanche of new Chinese retail outlets, including China Bazar, China Mall, La Estrella, Nicaragua Electrónica, Mundo Nica, and Supermercado Chino, among others.
Beyond commerce, PRC engagement with the Ortega government has further included agreements to train Nicaraguan police and other government personnel, as well as trips by Nicaraguan journalists to the PRC for extended visits.
These PRC activities in Nicaragua compliments a similar expansion of Chinese strategic logistics and other cooperation among other receptive governments in the subregion. In Nicaragua’s neighbor Honduras, PRC-based companies may improve ports and develop a multimodal logistics corridor from San Lorenzo on the Atlantic, to Puerto Cortes, near the juncture of Honduras, Guatemala and Belize on the Atlantic coast. China’s latitude for operations in the corridor, and their strategic significance, would be further magnified if the Castro government realizes its threatened expulsion of the U.S. from its Forward Operating Location (FOL) at Soto-Cano Airbase, along the route.
Beyond Honduras, Nayib Bukele’s government in El Salvador is giving the PRC ever expanding opportunities to flood his country with construction and other personnel. These include construction of two water treatment facilities, a tourist pier, a new library and national stadium, with possible PRC development of a major port complex at La Union with an associated special economic zone.
The combined results of such developments would ultimately be a PRC-dominated logistics cluster within a cluster of economically dependent, politically vulnerable countries spanning the Gulf of Fonseca with PRC-operated transport corridors to the Atlantic coast at multiple points across Honduras, and Nicaragua. The relative malleability of the host governments to PRC influence, and their varying levels of aversion not the US would give China a permissive environment for conducting businesses and influence operations in the broader region in peacetime, as well as US-oriented military operations in wartime. The later could even include PRC warehousing and Atlantic-Pacific movements of military goods and personnel, as well as the possible projection of personnel and other threats from the area against the U.S. homeland.
Conclusion
Not all PRC investment and presence in Central America is a strategic threat. Nonetheless, it behooves the region, and the incoming Trump Administration in the US, to consider the dangers posed by the expanding web of PRC money, personnel and strategic logistics projects in Nicaragua and other vulnerable non-transparent regimes ever closer to the U.S., before that presence becomes more entrenched, and the PRC can exploit it in time of conflict.
[1] The author is Latin America Research Professor with the U.S. Army War College. The views expressed herein are strictly his own.
