Nicaragua hopes to privatize its megaproject plans

Part II in a III part series on the current and future challenges of Nicaragua’s economy

MANAGUA, Nicaragua—Nicaragua’s 4% economic growth this year might be modest, but the Sandinista government’s growing portfolio of proposed megaprojects is anything but.

The government’s megaproject-development plans, which already included a $500 million deep-water port, a $6.2 billion oil refinery, and a $30 billion inter-oceanic canal, recently expanded to include a $300 million Chinese satellite.

Yet despite the government’s enthusiasm, it doesn’t have the money to pay for all its megaprojects—not even on the credit card. So the only way Nicaragua can achieve its development dreams by privatizing them, says presidential economic advisor Bayardo Arce.

 “With the exception of the satellite, all these are projects are ones that we offering the private sector,” Arce told The Nicaragua Dispatch. “We aren’t saying we are going to build a $30 billion inter-oceanic canal or even a $500 million deep-water port at Monkey Point, but we can offer those projects to others. We can open Nicaragua for investment.”

A dubious megaproject conversion rate

Other large development projects offered to foreign investors also seem to be stuck on paper. At various moments during the year, the Sandinista government has announced a Russian-funded railway to shuttle tourists from Managua to Granada, a Nicaraguan airline to fly people about the world, and an Italian-funded coastal highway so folks can drive to different beach towns along the Pacific coast. The progress of those projects is unclear.

As new projects are announced with gusto, old ones seem to slip quietly into the forgotten corners of the political sofa cushions. The same is true for the many of the promises of ALBA, most of which have fallen by the wayside.

Over the past five years, Venezuelan President Hugo Chávez, who his attempting to get reelected this weekend, has promised Nicaragua a $6.2 billion oil refinery, a regasification plant, a fertilizer plant, a new ship to double cattle exports to Venezuela, two aluminum-production plants, a factory to produce industrial bags, construction of 200,000 homes, the creation of two engineering universities, an ALBA airlines and an ALBA baseball league.

Of all those promised projects, only the “Supreme Dream of Bolivar” oil refinery is moving forward—and slowly at that (the project is already about four years behind schedule). ALBA has already invested only $92 million in $6.2 billion refinery, mostly to cover the costs of building the highway to the future construction site.

 Still, the Sandinistas’ lack of success converting previous promises into reality has not deterred the government from continuing to dream big. Arce says the government “recognizes that some of these projects are very ambitious,” but insists Nicaragua needs big projects for the big task of pulling the country out of poverty.

“The country needs projects that require a lot of work and technology and allow for accelerated growth of the economy,” Arce says.

That’s the exact reason why so many people are having a hard time understanding why the government suddenly feels the urge to spend $300 million on a satellite from China—an enormous investment that will create only a handful of jobs, and maybe not even for Nicaraguans.

The argument for a Sandinista satellite

Even Arce seems to think the satellite is a bit of an impulse buy. He says the government’s decision to purchase a satellite—announced last month by first son Laureano Ortega-Murillo— was made based on a slick sales pitch from China.

Bayardo Arce

“Really, we didn’t have any original plans for a satellite, but these people came and made us see that they could sell us a satellite and that it would pay for itself. And so why not?” Arce said.

Arce says the Chinese promised the Sandinistas that the satellite would pay for itself; the government plans to rent its services to “all the telecommunication, television and data-traffic businesses.”  

The satellite will be the first in Central America—a Sandinista Sputnik of sorts. “It’s time for us to be first in something,” Arce says.

Still, it’s not clear who is actually interested in renting Sandinista satellite services. Neither of the two cell phone companies operating in Nicaragua have expressed any interest.

“CLARO doesn’t have any particular interest in a Nicaraguan satellite. If the government presents a good proposal and it makes sense, I image it will be considered. But that will probably be an issue that the government of Nicaragua will have to talk about with company headquarters in Mexico,” says CLARO’s Nicaragua director Roberto Sansón. “I don’t know if Central America has any commercial market for a satellite; I imagine the government has done their own studies and has their own numbers.”

Maybe not.

“We are still negotiating; we have to do all the studies. We haven’t bought anything yet,” Arce says.

Meanwhile, the presidential couple’s son—who has also been negotiating an $800 million telecom investment from Chinese company  Xinwei—told Sandinista TV last week that the satellite purchase could be finalized later this month in China.

Arce, however, appears to be distancing himself from the Sandinista space adventure. When pressed on some of the details of the satellite venture, Arce says he wasn’t around when the deal was hatched, even though he is the head of the Nicaraguan-Chinese Friendship Association.

“I wasn’t there when they announced it,” he says.

Nicaragua’s canal plans

Nicaragua’s loftiest megaproject plan is also the one that makes the most sense, Arce says… even if math is unfathomable in a country such as Nicaragua.

“The inter-oceanic canal costs $30 billion in a country that has GDP of $8 billion—that’s four times our GDP!,” Arce says. “But it is also a fact that international trade requires a canal.”

Arce says he thinks the canal project will happen. He says there have been various foreign governments and companies that have expressed interest in the project.

But when China started to sniff around, then is started to become real.

“Then China came and China has the means to do this,” Arce says. “They aren’t going to do it alone. The idea is that they are going to be the ones who organize this international project. And obviously, those who organize it will look for a way to get their own advantage from this.”

China, Arce says, is “the big leagues for us.”

Thought Nicaragua does not have diplomatic relations with mainland China, Arce says the Chinese have been “very pragmatic” in developing international relations with everyone. Arce dismisses the idea that Nicaragua must choose between China and Taiwan, because the two Chinas are already doing more than $14 billion worth of trade and investment with each other every year.

“China has put aside the issue of political diplomacy and focused on economy,”  Arce says. “They have a rhythm of growth and if that stops it will become very difficult for them. So (new investment and trade) is a matter of need for them.”

At the same time, Arce says, Nicaragua is working to improve its relations with Taiwan. He says Nicaragua hopes to evolve its free-trade agreement with Taiwan into more of an association agreement to encourage more investment and economic integration with the Asian giant.

It’s not about politics, Arce says. It’s about economics.

“It is difficult to understand this world if you want to look at it in the purity of political theory,” Arce says.

But that’s the pragmatic world in which Nicaragua—and the Sandinistas—operate today.

Next: part III: After the Venezuelan elections, what will be the future of the Supreme Dream of Bolivar oil refinery?

  • Joe Jones

    The canal would be a boon to Nicaragua, especially if the people are hired to build it? If Nicaragua really wants to jump ahead economically, the real answer is education.

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  • Mela Pellas

    Nicaragua is first in some things. Like, the first country in the universe to elect a rapist as President; the first to pass a Constitution and then disregard it; the first to have a couple as President and the first to have a bunch of know-nothings running a country. Also the first to go from having the best economy in Central America to being the poorest in the american continent, save Haiti. So we have been “firsts” at some things.

    • rodoldo

      are you serious? “first one to pass a constitution and then disregard it????wow

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  • betyerbottomdollar

    Please NO to anything built in Monkey point. Most of the canal building jobs will go to the chinese. The canal operating jobs will go to panas from the pacific side, and only a relatively few. The jungle will be destroyed, the marine life will be destroyed, the village of Monkey Point, it’s people and culture will be gone and for what? So the Sandis can pat each other on the back and say what a good job they did. Tourism has been increasing rapidly every year…protect and sustainably develop what the tourists come for and this beautiful country will see its economy grow steadily without selling it off to the chinese or destroying its nature.

  • jimmycoffee

    Mega projects are not the way forward for Nicaragua. They are just another means for the greedy elite to line their pockets with syphoned funds and dodgy accounting before either the project collapses or overruns by such an enormous amount that the investor no longer continues to bother. The fact that the Sandinista “government” (and I use that term loosely, as really it is just a collection of theives and moral imbeciles) can bandy about projects such as these without being laughed out of the shop, is only a sad reflection of how low Nicaragua has sunk politically in the last decades. Bread and circuses, its shiny, it glitters, therefore it excites.
    Meanwhile the bulk of the population will gain nothing from any of this save for perhaps a laboral job at a few dozen cordobas a day.
    A government that refuses to educate its people freely is no government at all.