Nicaragua’s $40-billion canal project will rely entirely on private funding and won’t involve the participation of any government—including China’s. That’s according to Ronald MacLean-Abaroa, spokesman for HKND Group, the private Chinese company awarded the concession to design, build and operate the canal project for the next 50 to 100 years.
“This is a totally privately held company and it is going to be private on the international level,” MacLean-Abaroa told The Nicaragua Dispatch in an exclusive interview. “We are based in Hong Kong because from there we can raise money in Paris, New York and London. But there will be no government involvement whatsoever, not from China or any other country. The minute you get governments involved in this kind of project, the private investors fly away.”
Government participation, MacLean-Abaroa stresses, “would kill this project.”
So far, the only investor backing the largest proposed infrastructure development in the history of Central America is enigmatic Chinese telecom tycoon and HKND chairman Wang Jing, a man of undetermined wealth who is underwriting the first phase of the project by himself, says MacLean-Abaroa.
“He has already put tens of millions of dollars into the project –it’s a lot of money, but for him it’s not that much,” says MacLean-Abaroa, a former Bolivian politico and World Bank official.
Still, no one seems to know how deep Wang’s pockets really are, or how much of his own coin he’s willing to throw at his Nicaragua canal project. MacLean-Abaroa says he thinks the 40-year-old Wang, who claims to serve as board chairman for 20 other companies operating in 35 countries, is part of the new generation of Chinese billionaires. But he’s not sure.
“He must be, I don’t know. They don’t list that in China,” MacLean-Abaroa says. “But he owns a building that is probably worth $50 million in Beijing.”
MacLean-Abaroa says Wang is already doling out serious cash to assemble a world-class team of consultants, engineers and technicians to work on the initial phase of HKND’s canal project. The feasibility report and environmental-impact studies are expected to take two years to complete. Once they are ready, Wang can take his canal project to market to try to find more private investors, MacLean-Abaroa says.
“From Wang’s point of view, it is better to have the feasibility study ready yesterday and the project started tomorrow, because right now he is assuming all the risk and cost. Every day that goes by he is spending a sum of money,” MacLean-Abaroa says.
Once the project is ready to move forward, HKND expects to find substantial financial backing from other investors among China’s nouveau riche.
“There are now hundreds of billionaires (in China), so it is easier to get money from that part of the world than from Europe or the United States as this stage. But it has to be private,” MacLean-Abaroa says.
Nicaraguans, however, may never know who the other investors are. MacLean-Abaroa says HKND, which is registered in the Cayman Islands, is a privately held international firm controlled entirely by Wang, who won’t necessarily have to open his books to the Nicaraguan public. At some point, however, Wang may decide to make his canal project a publically traded company, MacLean-Abaroa says.
“I know that (Wang) is planning on doing an IPO (Initial public offering) for his telephone company (Xinwei), so eventually he might do that (for the Nicaragua Canal project),” MacLean-Abaroa says. “I don’t know; I haven’t talked to him about that, but eventually if he wants to raise money in the capital market, he might have to go public.”
For now, the company will remain “totally privately held and controlled by Wang” and will be governed by market norms for transparency. “One of the essential things to go to the market is that you have to disclose a lot of things about the company by law, to be absolutely transparent to have open and competitive bidding. Otherwise, you can’t go to market,” MacLean-Abaroa says.
When asked if President Ortega the businessman is also invested in the project, MacLean-Abaroa reacted as if the question were an attack on his character.
“Do you think I would be involved in this project if I believed there was corruption?” MacLean-Abaroa responded to The Nicaragua Dispatch’s inquiry. “What I can tell you is that 100% of this is owned by Mr. Wang and there is no other interest at this point, even from other private investors.”
MacLean-Abaroa, an internationally recognized authority on issues of Latin American governance and anti-corruption campaigns, says he understands people’s concerns about corruption. But he insists the Nicaragua Canal project will be different. “I understand there is a long history of corruption in this country, in my country, in Latin America. But corruption, by definition, is the use of public means for private gain.”
Pressed on whether there’s any indication that is what Ortega and his inner cadre of Sandinistas are up to, MacLean-Abaroa held his ground. “That would mean there is a conflict of interests and that there is corruption involved. And if that were the case, I wouldn’t be here.”
‘Canal project is risk-free for Nicaragua’
MacLean-Abaroa also dismisses concerns that Nicaragua is acting like the stupid partner in the canal deal by giving the Chinese company rights to one-third of its national territory plus legal immunity. On the contrary, the company spokesman says, HKND is the one that’s assuming all the risk.
“All the risk and all the investment is private…There is no risk and no money involved for Nicaragua,” MacLean-Abaroa says.
Unlike traditional concessions, where the government would pay large consulting fees for international firms to conduct feasibility studies, Nicaragua has completely privatized the canal project so that Wang’s company assumes all financial responsibility for every phase of the development, in addition to paying the Ortega government for the right to do so.
MacLean-Abaroa says the Sandinista government is being “clever” because “they are not running any risk.”
But with risk comes rewards. Though the original Canal Law (Law 800) passed last year states that Nicaragua would maintain 51% control of the canal, the fine print of the concession granted last week stipulates that Nicaragua’s ownership will be through a gradual handover of shares over the next half century. In other words, Nicaragua will be a minority partner in the project until the canal’s 50th year of operation.
Loss of sovereignty is overhyped
Critics of the canal project claim President Ortega has forfeited Nicaragua’s sovereignty by outsourcing the canal megaproject to an unknown Chinese businessman. The opposition accuses the president of being a “traitor” and has compared Wang to former U.S. filibuster William Walker, who invaded Nicaragua with his own private army and eventually declared himself president in the 19th century.
Ortega, however, says the private Chinese canal will help Nicaragua become more sovereign by hoisting the country out of poverty.
“The Nicaraguan people have been fighting for sovereignty. And we will continue to fight for sovereignty, because we all know that sovereignty is a tangible element. But if there’s poverty, if there’s extreme poverty, if there’s economic dependence, there is no sovereignty,” Ortega said during Friday night’s signing ceremony with Wang.
MacLean-Abaroa says he’s confused by the whole sovereignty debate.
“The only way to lose sovereignty is through war,” he says. “This is a concession within Nicaraguan territory. A concession has a number of provisions so that the concessionaire can do his work, but I don’t understand the concept” of Nicaragua losing its sovereignty.
Wang, meanwhile, said his company promises to “respect Nicaraguan sovereignty, from a legal point of view.”
Concerns about expropriations
Nicaragua’s main business chamber, the Superior Council of Private Enterprise (COSEP), is preparing to challenge the legality of HKND’s concession before the Supreme Court. COSEP argues that the law’s provision for land expropriations violates private property rights.
But MacLean-Abaroa says those concerns are being blown out of proportion.
“On every route that the canal could take, the value of that land would increase immensely,” he says. So Nicaraguans whose properties need to be expropriated for the canal shouldn’t be worried because, “there would be a tremendous appreciation of land’s value along the canal route.”
When The Nicaragua Dispatch pointed out that COSEP’s concern is that the Canal Committee intends to indemnify expropriated lands based on their cadastral value rather than their market value, MacLean-Abaroa acted confused about what the concession law says.
“It’s the higher of the two (values), I am sure that— it’s the higher of the two, I’m not sure, but it has to be,” he said. “…I don’t know. But I would say that’s a minor concern.”
Other minor concerns have been raised by indigenous groups living in the South Atlantic Autonomous Region (RAAS), whose recently titled communal lands could soon be expropriated to make way for the canal, in violation of Nicaraguan Autonomy Law 445.
Congressman Brooklyn Rivera, a lawmaker representing YATAMA, an indigenous party that is allied with the ruling Sandinista Front, claims the National Assembly was trampling on the rights of indigenous autonomy by failing to consult communities whose lands could be expropriated by the canal project.
“The Rama people have not been consulted on this, nor has the territorial government of indigenous people living in Laguna de Perlas. Those two indigenous territories lay right in the path of five of the six proposed canal routes,” Rivera argued on the floor of the National Assembly last Thursday, shortly before the vote on the canal concession was approved. “This project talks about expropriation of communal territories of the indigenous, and that affects the existence and rights of the indigenous people. We can’t approve of this concession without information about it, and this law can’t substitute the legally established rights of the indigenous under Law 445.”
Less than 10 minutes after Rivera delivered his compelling argument for why the law should be shot down, he quietly and dutifully voted with the Sandinistas in favor of the canal concession.
Environmental issues will be addressed
Nicaraguan environmentalists have raised concerns that the canal project will be devastating to the country’s strained watershed and massive Lake Cocibolca, considered the future source of drinking water for all of Central America. In addition to concerns that the lake is not deep enough to carry the type of massive post-panamax supertankers that HKND Group hopes to attract with the Nicaragua Canal, conservationists are worried that the endless lineup of oil tankers plying Lake Cocibolca will pollute and diminish Nicaragua’s future water supply.
President Ortega used to share those concerns, as several journalists discovered this weekend while looking back through old news clips. During a speech in May, 2007, the Sandinista leader said that “not for all the gold in the world” should Nicaragua allow an inter-oceanic canal to be built across Lake Cocibolca.
Apparently the president is no longer concerned about that. HKND, which has already hired a leading international environmental consulting firm called Environmental Resources Management (ERM), says all environmental concerns will be addressed in due time.
“We have hired the best environmental resource management company in the world—a global company based in England,” says MacLean-Abaroa. “We have hired them to conduct environmental- and social-impact studies, because there are a lot of people who are going to be affected, including the indigenous people.”
But the environment can be fixed with money, he says.
“The problem with conservation is money. Nicaragua has been deforested by poverty and war and there is no money to clean the rivers or maintain the lakes,” MacLean-Abaroa says. The canal project, he claims, “will provide the resources” to keep the rivers clean and reforest the country.
“The net impact will be positive,” he promises.