HKND: Chinese gov’t is not involved in Nicaragua Canal

Canal company says its Nicaragua megaproject is a private endeavor that will not seek any government funding. In exclusive interview with The Nicaragua Dispatch, the company’s spokesman also addresses concerns about sovereignty, land expropriations and transparency. Seventh installment in a series on Nicaragua’s canal plans.

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.

Ronald MacLean-Abaroa

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.

 

  • Carlotta Chamorro

    Welcome to the renewed Banana Republic Tim!

    So that you know:

    The canal has absolutely nothing to do with the canal project.
    Learn to read among the banana leaves:

    The motives are:

    Ortega being with the “agua al cuello” or experiencing the first “patadas de ahogado” after their Hugo Chavez Pimp died well….this are the consequences.

    Ortega & Co.LTda. not having the slightest about honest working became of the “left” as anybody with clean earned money must have stolen it so the become populist BS’er to get the cash.

    Just think….If Maduro in Venezuela with all the oil in the world is also with the “agua al cuello” don’t you know visiting the Pope is also “patadas de ahogado”?

    Actually, the whole thing is very very good news, it’s a matter of days to the end of the Alba or Siglo21 or Chavismo-Orteguismo then never forget what probably you know since birth: easy come easy goes, the ran out of cash to the extent that Maduro has to clean his butt with his bare hands, if at all….

    Thanks for your work Tim!!

    • Fredy Sandoval

      The master project of the Panama canal was an initiative of one man, Mr.J.P. Morgan who with a great vision saw the great potential and the upcoming benefits for the next 100 years for the US industry.
      Continue denying and sabotaging the efforts of this government for political purposes to launch the canal project is an unpatriotic gesture.

      Your words are full of hatred…poor of you, you really deserve compassion for the ignorance you expressed.

      • Udon

        Fredy: You are comparing apples and oranges. True — at the height of Morgan’s career during the early 1900s, he and his partners had financial investments in many large corporations and were accused by critics of controlling the nation’s high finance. He directed the banking coalition that stopped the Panic of 1907. He was the leading financier of the Progressive Era, and his dedication to efficiency and modernization helped transform American business.

        In the era of financial barons such as JP Morgan, it is true that he others financiers like him exerted significant power not only in the USA and other parts of the world. But that was then, when the world was so much different than today. Today even moguls like Bill Gates, Warrent Buffet, et. al., have power comparable to the financial giants of yester years.

  • Ken

    Good, thorough, interview that with luck will calm some of the unnecessary fears this project is stimulating.

    At the same time, the interview shows us exactly where to look to find the facets of the project to be fearful of. After insisting that HKND is a 100% private company and defining corruption as “the use of public means for private gain,” MacLean-Abaroa is able to assure us that he, an employee of HKND, is neither aware of any corruption nor would be involved if he were aware of it.

    Well, by his definition of corruption, a 100% private company couldn’t be corrupt, since there are no public funds involved to steal. However, a private company could commit all sorts of other errors and even crimes without those falling within MacLean-Abaroa’s definition of corruption. Moreover, he notes that taking HKND public would require levels of transparency that at this point the company prefers not to offer. In short, HKND could behave very badly without that behavior fitting MacLean-Abaroa’s definition of corruption.

    Second, MacLean-Abaroa is 100% employed by a 100% private company, so is obviously not speaking with any authority or responsibility for what may or may not happen on the Nicaraguan end of the deal. That is of course where there may be corruption, but MacLean-Abaroa is neither involved in nor responsible for any shenanigans that may surface there.

    Although my sense is that MacLean-Abaroa is an honorable fellow who is telling the truth (and much of what he says should calm the fears of those opposed to the project), he also appears to be a smart enough fellow to say exactly what he means and no more. He is not promising that the company will always be squeaky clean or that there will be no corruption associated with the project, only that right now HKDN itself is not a knowing partner to any political corruption.

  • https://sites.google.com/site/microtechnonstop/ Henry Norman

    PRC appears to be heavily involved in the Nicaragua Canal project, albeit — at this point in time — somewhat indirectly… Major subsidiaries of the PRC Xinwei Telecom Enterprise Group include:

    • Beijing Xinwei Telecom Technology, Inc.
    • Beijing Xinwei Yongsheng Telecom Technology Co., Ltd.
    • Chongqing Xinwei Telecom Technology Co., Ltd.
    • Shenzhen Xinwei Telecom Technology Co., Ltd.
    • Xinwei (Hong Kong) Telecom Co., Ltd
    • Xinwei Russia Telecom Co., Ltd.
    • Xinwei Cyprus Telecom Co., Ltd.
    • Beijing Arrowping Telecom Technology Co., Ltd.
    • Beijing Huaqing Xinwei Technology Development Co., Ltd.
    • Xinwei Micro-electronics Technology Co., Ltd.
    • Beijing Xinwei Alliance International Trading Co., Ltd.
    • Beijing Xinyoda Video Communication Technology Co., Ltd.
    • Beijing Chengjun Dongfang Technology Co., Ltd.

    Lots of PRC party secretaries on the boards of these companies! But do not take my word for it, peruse the web pages publicized by Xinwei Telecom, start at their home page and take it from there.

    http://www.xinwei.com.cn/en

    You might be surprised! Mr. Weng “unknown”? How stupid does Mr. MacLean-Abaroa think people are? Unbelievable arrogance!

    No interest from President Ortega? Maybe not, but peruse the article posted at /en/(S(h3en0pqfmvbb0fb1igkyyo45))/xinwen_details.aspx?colid=1044… No interest, in a US$300 million deal? Really?

  • https://sites.google.com/site/microtechnonstop/ Henry Norman

    URL correction:

    http://www.xinwei.com.cn/en/(S(h3en0pqfmvbb0fb1igkyyo45))/xinwen_details.aspx?colid=1044

    Sorry about that!

    Also, Many Thanks, Tim! Great article!

    • tar

      much clearer. thank you. in chinese

  • Michael C.

    The last statement by Mr. MacLean – Abaroa “the net impact will be positive” is totally inappropriate as he has pre-judged the outcome of the EIA prior to its development. Is Mr. MacLean – Abaroa an environmental specialist that knows and understands Nicaragua’s complex ecosystems? While he may hope that the outcome is positive, he can not promise this if the EIA is truely objective.

  • car

    “The only way to lose sovereignty is through war,”
    perhaps mr abaroa should go back to school…just for a day or so.

    “not for all the gold in the world”
    no, just all the money in china…

    “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.”

    this is perhaps the best quote of the entire piece! sure it’s a minor concern, TO YOU!

  • David Myrick

    I hope and pray this never happens! To me, the enviromental damage would not just be from the construction but the actual traffic of ships across Lake Nicarauga as well as the ships waiting in line along the Pacific and Atlantic coasts. I travel to Nicaragua frequently for business and pleasure and have fallen in love with the beauty of this Country. I also work in Panama and recently stayed at a supposedly five star resort outside of Panama City on the Pacific side and was sickened by the amount of oil and diesel that was deposited along the beach and water that was not fit to even wade in. At night you could see the hundreds of ships sitting idle waiting to enter the Canal and you can imagine the waste that is released by these ships and washes to the shore. I also worry about the damage to the Atlantic Coast that survive on the fishing and lobster industry not only from the traffic of the shipping but also the changes that would happen to the eco system. I hope the people of Nicarauga fight this from ever happening and continue to focus on creating manufacturing jobs and tourism which are both growing by leaps and bounds each year!

  • Carlos Briones

    This man is oblivious of Mr. Chang’s heavy connections with the Chinese Communist Party and the very public fact that over 2/3 of China’s companies are government-owned. Xinwei is a facade.

    Equally disturbing is his kool-aid-spoon-fed proposal that an IPO of a Chinese company could be the source to finance this so-called Canal. First, the world knows the chinese (government) has an unhealthy habit of manipulating its companies’ books. In fact, in the entire year (2012), only one chinese went public in the U.S. (VIP Shop). Some twelve others, pulled their shares from the market because they were losing their value.

    Lastly, aside from the four issues raised (funding, sovereignty, environment, and expropriations) one pivotal issue completely escapes the article. The Monroe Doctrine. It remains to be seen how the U.S. would perceive this chinese (government) adventure when China’s diesel-fueled super-carrier the Liaoning appears at the Cocibolca.

    • Tim Rogers

      With all due respect, Monroe Doc is a question for US, not MacLean-Abaroa. This is an interview with the HKND spokesman to let him answer questions about his company, not US foreign policy.

      • Carlos Briones

        With an equal amount of respect, I would submit to you, Tim, that the Monroe Doctrine since its inception has always been applied in a subjective manner as opposed to an object-specific U.S. foreign policy.

        Accordingly, because China’s foreign policy involves, without limitation, the formation and listing of sham/shell corporations for purposes of purchasing/securing raw materials and minerals, as a spokesperson for the Chinese Communist Party, vis-a-vis Xinwei, Mr. Abaroa should be in a position to respond to this inquiry. Is HKND a facade operating under other facade (Xinwei) and is it not true that the CCP is behind the funding for this project?

  • Terry

    So is this story dead now? When I saw that the investor was trying to pitch this deal based on all of the the oil that the US is going to be exporting to China I had it completely figure out. It just took checking US government projections which indeed did have the USA as the world\s second largest producer of OIl but still producing 37% less than what it used the suspicions I already had were confirmed. This deal could not work even if I offered to load you the money to make the investment you would say no. The panama canal;s total profits are barely enough to make the deal over 50 years. And this canal would make something less than that due to competition from the Panama canal.

  • http://no Damian

    HKND is a private company that will hire the best companies to get the job done. Indirectly, HKND success is China’s success. New powers such as China have big strategic visions and Nicaragua is about to be part of it. Let’s wait for the professionals to conclude their feasibility studies. And if they are positive this canal will happen.

    Time’s are changin’ ….
    http://www.economist.com/news/international/21579039-chinas-growing-empire-ports-abroad-mainly-about-trade-not-aggression-new-masters

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