Dr. Paul Oquist’s Speech at the First China-CELAC Infrastructure Cooperation Forum
On June 5, 2015, Dr. Paul Oquist, head of the Nicaragua delegation delivered a speech about the Nicaragua Canal project at the 1st China-CELAC Infrastructure Cooperation Forum in Macau, China. Paul Oquist is the Private Secretary for National Policies to Presidency of Nicaragua and the Executive Secretary of the Nicaragua Canal and Development Project Commission. Paul’s speech at the forum is reproduced as below. The views and opinions expressed herein do not represent those of the HKND Group.
The theme of my speech today is “Infrastructure for the Transformation of Nicaragua and World Commerce”.
We have seen from yesterday how infrastructures can transform economies and even social relations in our societies. We consider Nicaragua being a prime example for this in the course of this decade.
Many people ask why in this decade Nicaragua will have such large investments. One reason for this is the National Development Plan that began in 2007 when President Ortega reassumed the Presidency of Nicaragua.
National Human Development Plan
Let’s see what happened since 2007. Nicaragua has been implementing the National Human Development Plan. The objective of the plan is economic growth with macroeconomic stability, job creation and poverty/inequality reduction.
Many things happened in Nicaragua since 2007. The country has been growing at about 5% a year, which is the highest growth rate in Central America. That rapid growth has been accompanied by macroeconomic stability, and inflation has been going down year by year.
The foreign direct debt decreased from 109% of the GDP in 2005 to 40% in 2014 and likewise, the internal debt has also gone from 25% of GDP to 8.5% of GDP.
Over 800,000 jobs have been created and in the formal sector, where 420,000 formal jobs have increased to 720,000. There are still many people working in the informal sectors. So there is an enormous demand for formal sector employment.
About the inequality reduction, according to the World Bank, Nicaragua is a country that has most reduced inequality when compared to the year 2000. Our Gini coefficient of inequality is going down constantly. You can see how the society is heading towards equality.
There is not only income equality, but also sexual equality. According to Inter-Parliamentary Union (IPU), in 2013 Nicaragua is the No.1 in the world with regard to women holding positions in the National Cabinet. 57% of the Ministers and vice Ministers are female. Minister of Education, Minister of Health, Minister of Social Welfare, Minister of Defense, Minister of Interior, National Police Chief, General Prosecutor and President of the Supreme Court are all females.
No.1 in Public Safety in Central America
Nicaragua has the lowest cost of living in Latin America and the Caribbean. However, this lowest cost of living is accompanied by the best public safety in Central America. The UNDP Regional Human Development Report 2013-2014 says that the National Police of Nicaragua (PNN) is a leader in Central America and in the world.
The ratio of FDI in GDP is 12.3%. The country has 286 million dollars FDI in 2006 and now has 10.9 billion dollars contracted investment. This is the scenario Forbes Magazine for Central America last year called “El Milagro Nicaragüense”, which is a Nicaraguan Miracle.
So what are the investments in 2015? The largest is the project of the Grand Interoceanic Canal. Nicaragua has a unique geographic location. Our macro strategy is to build a route for trade and communication worldwide and to make Nicaragua a multimodal logistical center for regional and global trade, a business hub for Central America and Latin America.
The Canal will have the largest locks in the world
In the course of route selection, despite its high economic cost, route 4 was chosen as the final route since it has the lowest environmental and social impacts. The proposed waterway will be 275.5Km long, 30-33m depth with a base width of 280m.
Additionally, the project will be the largest civil earthmoving operation in history, with 5,000 Mm3 of excavated material to be placed in 35 areas for material disposal along the canal. Rehabilitation programs for the waste disposal sites will be developed. Besides, the Canal will build the largest locks in the world by 2020.
The Grand Canal Project is designed not to use water from Lake Nicaragua as the locks will capture water from the Punta Gorda River Basin with supplementary water to be provided through the Agua Zarca Reservoir. A system for water conservation consisting of 9 Water Saving Basins to recycle water in both locks will also be built, which should reduce the total demand for water sluice up to 60%.
The mega-project also involves the construction of two ports, which will constitute two distribution hubs. The capacity of Punta Águila Port, on the Caribbean Coast, will reach 2.8 million tons of petroleum products and 2.65 million TEUs of containers, whereas Brito Port, on the Pacific Coast, will accommodate 2.8 million tons of oil products and 1.95 million TEUs of containers, and will include a multifunctional dock.
The Canal will create 113,000 jobs directly or indirectly
Apart from that, other major projects include the bridge over the Pan-American Highway, some tourist resorts and a Free Trade Zone in Rivas with a 4.34 km2 area for the export and import of goods and services, as well as an area of financial offices, an export processing zone for the production of goods and an urban area for an estimated population of 140,000 people. More than 113,000 jobs will be directly or indirectly created by this particular project.
Nicaragua’s unique geographical position and abundant water resources are the other reasons that make the canal proposal viable. It is expected that the Grand Canal will capture over 5% of world maritime trade, which will be dominated by mega ships in the future. It is evident that large ships are replacing smaller ships in all trade routes due to cost efficiencies. Post Panamax vessels can transit through the Panama Canal after expansion, but the mega container ships and triple E vessels will not be able to use the Panama Canal even after expansion. In other words, the world needs a larger canal.
The economic and social impacts of the Canal are also very important. The Project will create 50,000 job opportunities in the construction stage and 3,700 jobs in 2020 when it comes into operation. The multiplier effects in such rapid employment growth will boost the economy of Nicaragua.
On the other hand, Caribbean deep water port can help to reduce Nicaraguan logistic costs from 25% to 13% of its GDP.
People living along the Canal route will be better off
In a five-year period ending 2018, the main impacts expected from the Grand Interoceanic Canal of Nicaragua will include two-digit economic growth, 1.2 million formal jobs, around 50% of population with bank accounts and a 115.1% increase of government revenue over 2013. Government income increment will be a source of funding to fight extreme poverty. This estimation comes from the fact that the Panama’s economy has doubled during the last 7 years despite financial and economic crisis.
HKND partnered with top-ranked players in the industry such as McKinsey & Company, MEC Mining, SBE, ERM as well as China’s CRCC to carry out feasibility studies.
The objective of our resettlement plan is that everyone must be better off than they were before. 30,000 hectares of land will be regenerated with proper soil management, leading to fertile farmland towards the end of the project. Meanwhile, there will be a choice between: Cash Repayments or Resettlements which would be within a maximum distance of 15 kilometers from the current residence. Technical support, such as various kinds of skill training, will be provided for restoration of livelihood.
The Canal will reverse the deforestation trends in Nicaragua
Globally, the construction of the Grand Canal will reduce 32.5 million tons of annual CO2 emissions made by maritime trade worldwide.
Nicaragua has been facing the challenge of an ongoing deforestation, with the current rate of deforestation being 70,000 hectares annually. The Canal is a water project whose viability depends on water, which in turn requires massive reforestation and watershed management. Development of the project will help to reverse the deforestation trends, including financing the improvement of the RAMSAR sites, preventing further penetration into and facilitating the rehabilitation of Indio Maiz and Punta Gorda Reserves.
Nationally, the integrated watershed management could stop the present and future sedimentation of Lake Nicaragua, protect local populations from floods or drought and strengthen the protected areas. Above all, the Grand Canal will be about to create net positive environmental impact at both regional and national levels.
Positive multiplier effects on Nicaragua’s economy, society and environment
The project will also help Nicaragua to gain economic independence as it’s expected to generate numerous job opportunities for the young Nicaraguans and Central Americans in professional, technical, and skilled sectors. Also, sub-projects in the industrial and service sectors will drive regional economic growth. With the increased trade flows, improvement of maritime infrastructure and greater needs for workers as well as higher demands for construction-related transportation companies, the Project represents greater opportunities for the integration of Central America.
Overall, the Project will have positive multiplier effects on the country’s economy, society and environment. The Canal project will lead this country and its people to shake off extreme poverty, increase ecosystems resilience and gain economic independence, and eventually achieve a prosperous and fairer Nicaragua.
President Daniel Ortega talked about China and Chinese people on December 22, 2014 in Managua, “And I can tell you, my friend Wang Jing, and all the sisters, brothers and friends of China here today, and I can tell your people that, in Nicaragua, the Nicaraguan people have a great love, a great admiration for the Chinese people. You are welcome to Nicaragua, and will always be welcome to Nicaragua!”