VZCZCXYZ0012
RR RUEHWEB

DE RUEHMU #2584/01 3312132
ZNR UUUUU ZZH
R 272132Z NOV 06
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 8293
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

UNCLAS MANAGUA 002584 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECIN EIND ELTN EWWT NU
SUBJECT: NICARAGUA: INTEROCEANIC CANAL PROPOSALS MIRED IN 
POLITICS 
 
SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) Summary: In early October, President Bolanos 
unveiled the "Grand Interoceanic Canal for Nicaragua (GNIC)" 
project, a proposed $18 billion, 172-mile long, trans-isthmus 
"wet canal."  The GNIC will compete with three more modest 
"dry canal" proposals also under consideration. The most 
advanced of the four projects is Canal Interoceanico de 
Nicaragua (CINN), which proposes a trans-isthmus railroad or 
"dry canal."  CINN completed its feasibility study in 2003 
and plans to begin an environmental impact study in the 
coming year.  SIT Global also proposes a trans-isthmus 
railroad with an oil pipeline and fiber optic cable that 
would run parallel to the rail line.  While it has not yet 
completed a feasibility study, SIT Global has announced its 
plans to begin an evironmental impact study.  The Eco-Canal, 
proposed by the GON in 2004, would be a combination "wet and 
dry" barge canal.  President-elect Daniel Ortega has 
supported the idea of a "dry canal," first backing the 1997 
SIT Global proposal and more recently backing the CINN 
proposal.  With the Bolanos presidential term ending in 
January 2007 and the "wet canal" sporting an enormous price 
tag, a "dry canal" would appear more likely to receive 
government approval.  End Summary. 
 
"The Grand Interoceanic Canal for Nicaragua" 
------------------------------------------- 

¶2. (SBU) In early October, President Bolanos unveiled the 
"Grand Interoceanic Canal for Nicaragua (GNIC)" project, a 
proposed $18 billion, 172-mile long, trans-isthmus "wet 
canal."  The GNIC idea has been around since 1999, but was 
revived in October 2006 when Bolanos presented the project at 
the Defense Ministers of the Americas conference.  The 
most-favored route of the proposed "wet canal" would pass 
through five rivers and Lake Nicaragua, beginning at 
Bluefields Bay on the Atlantic coast and ending in Brito on 
the Pacific coast.  Environmental critics of the GNIC worry 
that any oil spillage in Lake Nicaragua would destroy the 
ecosystem.  Members of the government-appointed GNIC 
Commission include Mario Alonso Icabalcete (former-President 
of the Central Bank), Arturo Harding (Minister of Environment 
and Natural Resources (MARENA)), and Alejandro Arguello 
(Minister of Trade and Commerce).  Bolanos has not provided a 
timeline for moving the project forward and admitted that the 
project is in its "infancy."  Diplomats who received the 
proposal expressed skepticism about the plan, questioning the 
timing of the proposal, coming just months before Bolanos' 
term ends and weeks before a referendum in Panama on 
expanding its canal.  Ironically, (or perhaps calculatedly) 
the splash made by Bolanos may have encouraged Panamanian 
support for its then-struggling referendum, which passed 
without difficulty on October 22. 
 
CINN: The "Dry Canal" 
-------------------- 

¶3. (SBU) Bolanos was not the first to propose an interoceanic 
canal for Nicaragua, but his proposal is the most ambitious 
and must compete with three more modest proposals to build a 
"dry canal."  Canal Interoceanico de Nicaragua (CINN), 
founded in 1994, is the most advanced of the four projects. 
It proposes a $2.6 billion railroad from Monkey Point on the 
Atlantic coast to El Gigante on the Pacific coast, linking 
deepwater container ports built for the project, and creating 
free trade zones. The National Assembly granted a 40 year 
concession to CINN in 2001 and the company completed a 
feasibility study in 2003.  CINN has complained, however, 
that the Bolanos government has purposefully impeded its 
progress since 2003 by not issuing the necessary permits to 
begin an environmental impact statement.  CINN reportedly has 
financial backing from Hong Kong, Taiwanese, Japanese, and 
Chinese investors and would compete with U.S. west coast 
railroads to transport Asian goods to the U.S. east coast. 
CINN, led by a U.S. investor, claims to have the support of 
President-elect Daniel Ortega.  After the November 5 
presidential election, CINN sponsored a full-page 
advertisement in a local newspaper extending congratulations 
to Ortega.  The general manager of CINN, Francisco D'Escoto 
Brockman is the former Sandinista Ambassador to the United 
Kingdom and currently occupies a home that was expropriated 
from a U.S. citizen during the Sandinista regime. 
 
SIT GLOBAL: The Other "Dry Canal" 
-------------------------------- 

¶4. (SBU) SIT Global proposes a $4 billion trans-isthmus 
railraod running from Monkey Point on the Atlantic coast to 
Corinto on the Pacific coast.  An oil pipeline and fiber 
optic cable would run parallel to the rail line, using the 
same right-of-way.  CINN has accused President Bolanos of 
"stealing" its "classified" plans, which were presented to 
Bolanos in 1995 when he was then Vice-President, and giving 
them to his son Enrique, who created SIT Global in 1997.  
CINN's accusations have never been proven and Enrique Bolanos 
filed libel charges against CINN in 1998.  (Note: The charges 
were dismissed by a judge, who resigned his position on the 
day of the ruling. End Note.)  SIT Global is backed by 
Bayardo Arce (a high-ranking Sandinista Liberation Front 
(FSLN) official and businessman) and claims to have the 
support of private Canadian oil and telecommunications 
companies.  President-elect Ortega supported SIT Global in 
1997, but switched to CINN in 2003 for unknown reasons.  SIT 
Global has not undertaken a feasibility study, but has 
announced its plans to begin an environmental impact study, 
despite not having the necessary permits. 
 
Eco-Canal: Still in the Running 
------------------------------- 

¶5. (U) The Eco-Canal, proposed by the GON in 2004, would be a 
combination "wet and dry" canal.  A barge canal would run 
from San Juan del Norte on the Atlantic coast to Granada, via 
the San Juan River and Lake Nicaragua.  Ground transportation 
from Granada to the Pacific coast would complete the 
trans-isthmus route.  In 2004, GON officials invited the 
United States Army Corps of Engineers (USACE) to conduct a 
feasibility study for the Eco-Canal.  While USACE officials 
met with the GON, discussions concluded with no plans for 
further USG involvement.  Costa Rican officials  have 
publicly stated that they will not allow the San Juan River, 
which forms 37 miles of the Nicarguan and Costa Rican border, 
to undergo the necessary dredging for a canal.  They believe 
that dredging would harm the ecosystem and threaten their 
burgeoning eco-tourism industry.  Despite this obstacle, the 
GON still cites the Eco-Canal as a possibility. 
 
¶6. (SBU) Comment: The four interoceanic canal projects tell a 
story of competing interests vying for funding and political 
support.  Bolanos' "wet canal" proposal seemed only to focus 
attention on the perhaps more realistic "dry canals" 
currently struggling to find political champions to move 
their projects forward.  CINN has met strong resistance from 
MARENA, which has blocked the issuance of environmental 
permits for almost three years.  Notably, the Minister of 
MARENA sits on the GNIC commission and has publicly supported 
the "wet canal."  SIT Global contends that it would 
complement a "wet canal" by offering the added benefit of an 
oil pipeline and fiber optic cable, however, it has struggled 
financially.  President-elect Ortega stated on November 11 
that he is reviewing all the canal proposals, but noted that 
the "wet canal" would create more jobs.  Historically, Ortega 
has favored the idea of a "dry canal," first backing the 1997 
SIT Global proposal and then backing the CINN proposal in 
¶2003.  CINN may win Ortega's full blessing, but such a 
benediction depends on whether the firm can successfully 
navigate the political waters of the new administration.  End 
Comment. 
TRIVELLI