Rival to Panama Canal Planned

Seeking to cash in on booming Asian exports, Nicaragua will announce a $20-billion proposal next week to build a canal linking the Pacific and the Atlantic oceans that would accommodate ships too large to use the Panama Canal, Nicaraguan officials said Friday.

If approved by Nicaragua’s Congress, the project would be a joint public-private venture financed by unnamed investors, said Lindolfo Monjarretz, a spokesman for Nicaraguan President Enrique Bolanos.

The Grand Inter-Oceanic Nicaragua Canal would make use of the 60-mile-wide Lake Nicaragua and follow at least part of a route first proposed by American and European entrepreneurs in the 19th century, officials said.

“We will have a deeper draft than the Panama Canal and reach a different market than Panama,” Monjarretz said in a telephone interview. “The construction of the canal ... will be pushed forward by Nicaragua because it’s necessary for global trade.”

The official announcement will come Monday, when Nicaragua plays host to a summit of Western Hemisphere defense ministers, including U.S. Defense Secretary Donald H. Rumsfeld, Monjarretz said.

With the century-old Panama Canal expected to soon reach the limit of its capacity, a boom in Asian commerce is fueling several proposals for new projects to ship containers across the Central American isthmus.

The Panama Canal, opened in 1914, cannot accommodate vessels that are more than 106 feet wide and 965 feet long. On Oct. 22, Panamanians will vote on a referendum to expand their country’s facilities. The proposed $5.25-billion upgrade would allow vessels with double the current tonnage to use the 50-mile-long waterway.

Rodolfo Sabonge, a top official of the Panama Canal Authority, the quasi-independent body that has run the canal since the United States turned it over to Panama in 1999, said Friday that there was insufficient ship traffic to support both a widened Panama Canal and a second canal in Nicaragua.

“If the referendum passes and the widening goes forward, [the Nicaraguan project] is not feasible,” Sabonge said. “Our analysis shows that if our project is approved, there would not be enough demand to pay for the two, and they would have to have a cost structure much higher than ours.”

Recent polls show that nearly two-thirds of Panamanian voters favor expanding the canal. If approved, the project calls for work to begin next year, with completion expected in 2014.

Private investors are behind at least two other so-called dry-canal projects across Nicaragua and neighboring Honduras that would include new highway and rail links connecting expanded Pacific and Caribbean ports on either side of the isthmus.

“Obviously they are trying to compete with the Panama big locks project,” Geraldine Knatz, executive director of the Port of Los Angeles, said of the Nicaraguan proposal.

“But Panama has spent years studying this project, looking at the economics and doing the engineering,” Knatz added. “This is not something you just decide on overnight.... It would be a big catch-up for Nicaragua to step in and do this.”

Knatz said she favored an expanded Panama Canal. “I can look out ahead to a time when the West Coast is not going to be able to handle all of the volume,” Knatz said, noting that the Port of Los Angeles, the nation’s busiest container facility, would reach capacity between 2020 and 2025.

Ships currently must reserve passage through the Panama Canal up to several months in advance. Those lacking a reservation can be forced to wait as long as four days for an open slot to cross from the Pacific to the Caribbean.

For years, shipping lines have called for the Panama Canal to be enlarged so that it could accommodate bigger oil tankers and containerships larger than the so-called Panamax generation of vessels, which are specifically designed to allow them to transit the canal.

Nicaraguan President Bolanos told reporters in Managua, the capital, last week that his government had been studying a canal proposal for “six or seven years.” He said Nicaragua’s canal would take a decade to build and when completed would be more modern than Panama’s.

“We know that for every 100 ships that come to the Americas, only 7 use the Panama Canal,” he said, according to Nicaraguan media reports. “There’s a lot of business to share.”

If a Nicaraguan canal were built, “it would bring an economic effervescence never seen before in Central America,” Bolanos said.

Spokesman Monjarretz said that the Nicaraguan government had been in informal talks with private investors and that an announcement Monday would formalize an agreement. He declined to elaborate.

Nicaragua has been considered for a canal project since the mid-19th century, when increased shipping traffic from the California Gold Rush created a demand. At one point, railroad baron Cornelius Vanderbilt held an exclusive contract to build a canal there.

Although a canal was never built, thousands of pioneers made the transit disembarking from ships at San Juan del Norte on the Caribbean coast, trekking overland by stagecoach to Lake Nicaragua, crossing the lake by boat, then making their way to the nearby Pacific coast.

Nicaragua was seriously considered for the U.S.-built canal that was ultimately constructed in Panama in the early 1900s. A Nicaraguan postage stamp depicting a large volcano helped stoke fears among U.S. congressmen that an earthquake or volcanic eruption would hit the area.

Now, Panamanian President Martin Torrijos and other officials are warning that failure to widen the Panama Canal will invite competing projects, jeopardizing the nation’s single-largest source of revenue.

In recent years, Japanese and Chinese investors, among others, have reportedly met with Nicaraguan officials to discuss a possible canal project.

New impetus to the efforts in Central America has come from the global explosion in world trade. Container traffic last year grew 4.8% worldwide.

Mike Wasem, spokesman for the Port of Tacoma, Wash., the West Coast’s fourth-largest, said a large-scale canal system in Nicaragua “would certainly give shippers greater waterborne access to the Gulf Coast and the East Coast of the United States.”

But he added that Nicaragua faced significant competition from projects already underway to build international container facilities at Prince Rupert, Canada, and Lazaro Cardenas, Mexico.

A Nicaraguan canal would pose little threat to U.S. West Coast ports, he said. “It would provide an additional outlet for a volume of cargo that is expected to grow beyond the current ports’ expansion options.”

Failure to boost capacity on the West Coast of the U.S. -- or to expand cross-isthmus traffic in Central America -- could lead to expanded use of the Suez Canal for shipping from East Asia to Europe, some analysts say.

*

hector.tobar@latimes.com

chris.kraul@latimes.com

*

Tobar reported from Mexico City and Kraul from Bogota, Colombia. Special correspondent Alex Renderos in San Salvador and Times staff writer Ron White in Los Angeles contributed to this report.