HKND Group

HKND Group, a unit of holding company the HK Nicaragua Canal Development Investment, won a concession in June 2013 to design, build and manage a US$40 billion canal in Nicaragua to rival Panama despite having no infrastructure experience.

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DIPLOMACY

High-powered Nicaraguan canal delegation quietly visits mainland China

Observers say switch of diplomatic allegiance from Taipei to Beijing not in the mainland’s interest

PUBLISHED : Tuesday, 29 October, 2013, 10:47am
UPDATED : Tuesday, 29 October, 2013, 2:52pm
 

A top-level Nicaraguan delegation - headed by the president’s son - travelled to mainland China and Hong Kong last week to discuss what could be the world’s largest waterway project, the South China Morning Post has learned.

The 21 politicians, academics and leading businessmen were hosted by HKND, the Hong Kong-based developer established only last year, which has been tasked by the Nicaraguan government to build a US$40 billion (HK$310 billion) canal through the Central American country.

Laureno Facundo Ortega Murillo, the son of Nicaragua’s president Daniel Ortega, led the group, which travelled to Beijing, Wuhan, Xuzhou and Hong Kong.

Young Ortega is also a presidential adviser on foreign investment and, according to Nicaraguan press reports, his mediation was instrumental in completing the canal deal. He declined to be interviewed for this article when approached by the South China Morning Post through intermediaries.

The Hong Kong-based company’s chairman Wang Jing, 41, insisted that his momentous canal project is strictly commercial; “I hoped this visit was relatively low-key,” he told the Post. The Chinese Ministry of Foreign Affairs in Beijing was also keen to clarify earlier this year that the canal project was not government-backed.

We are in a special moment in China and in Nicaragua. We are starting a new historical phase that is going to see closer relations
Nicaraguan delegation member Francisco Telemaco Talavera Siles

Those plans do, however, have diplomatic implications. Nicaragua is one of just 23 countries currently recognising the Taiwan-based Republic of China (ROC) as the seat of China’s legitimate government.

The visit to the mainland of the Nicaraguan delegation took place only three weeks after Nicaragua’s Minister of Foreign Affairs Samuel Santos Lopez caused consternation in Taipei when he referred to Taiwan as “China-Taiwan” in a statement. The fear in Taipei is that the government in Nicaragua’s capital Managua, wooed by economic might and technical capability, may switch allegiance to Beijing.

Delegation member Francisco Telemaco Talavera Siles, president of the National Council of Universities was more forthcoming.

“We are in a special moment in China and in Nicaragua. We are starting a new historical phase that is going to see closer relations,” he told the South China Morning Post on Saturday. “This project opens [up] the possibility of closer relations with the government and people of China.”

While insisting the delegation was not official, Arturo Jose Cruz Sequeira, Nicaragua’s former ambassador to the United States, told the Post that the visit was a sign that ties with Beijing are improving. “Without a doubt, trade [and] investment are huge components of the relationship. If the canal project goes ahead, the presence of China in all of its manifestations is going to be self-evident.”

Since the canal project met with street protests and a legal challenge at the Supreme Court in Managua by representatives of indigenous and creole community groups earlier this year, Wang’s greatest challenge has been to win over sceptics in Nicaragua.

HKND’s purpose of sponsoring the trip was to seek support among Nicaragua’s business community for the canal project, members of the delegation told the Post. The delegates included a member of parliament from the ruling party, the Sandinista National Liberation Front, and the head of the nation’s chamber of commerce, Cosep.

“We have doubts [over] whether it is technically possible, [over] the environmental impact and [over Wang’s] economic capacity,” said Telemaco. “But now we are convinced that in China we have [found] the technical capacity [and] the economic capacity.”

“There is no doubt in my mind that the canal is going to be good business,” Ramiro Gurdian Ortiz, a former head of Cosep and current head of Banpro bank, told the Post. “The companies here [in the mainland] are capable of building the canal.”

HKND has hired a team of engineers from the state-owned China Railway Construction Corporation (CRCC) to plan and design the canal, the Post reported earlier this year. The Nicaraguans visited 4th Institute, a CRCC subsidiary, which is in charge of designing the canal, and the corporation’s 11th Bureau, responsible for building the canal, in Wuhan as part of the trip, a HKND employee said. The delegates also visited the Three Gorges Dam, China’s largest civil engineering project, which was designed by the same group of engineers.

“We were able to see infrastructure comparable in size and in complexity to what is going to be [required for] the canal,” said Diego Cesar Vargas Montealegre, President of the American Chamber of Commerce in Nicaragua. “I did not realise until I saw it,” said banker Gurdian after viewing the dam. “[The CRCC engineers] know that the prestige [of building the project] is going to be theirs.”

In addition, the Nicaraguans met with representatives of XCMG, the third-largest manufacturer of construction equipment in the mainland, and with soybean trader VV Group, both in Xuzhou, Jiangsu province.

Construction of the canal is expected to begin by the end of next year and be completed by December 2019. Wang said he was confident the project was on track. In a longer conversation with the Post on Sunday, he repeatedly stressed that that the project was a private one and his company did not follow government orders.

Observers say that while the project is likely to bring substantial contracts to mainland contractors, it isn’t in Beijing’s interest to see Nicaragua switch sides.

“While I believe that development of the canal will eventually result in Nicaragua changing its diplomatic recognition, […] I don’t think it makes sense for it to happen in the near future,” said Evan Ellis, the author of China in Latin America: the Whats and Wherefores. “From a Chinese perspective, it would unnecessarily call further attention to the PRC role in the canal project, and would unnecessarily complicate China-Taiwan rapprochement.”

“The list of Latin American countries who want to switch diplomatic recognition from Taiwan to the PRC is long,” Antonio C. Hsiang, from the Centre for Latin American Economy and Trade Studies at the Chihlee Institute of Technology in Taiwan, wrote in an email.

“Honduras already downgraded its relationship with Taiwan by sending only a charge d’affaires, instead of an ambassador. In terms of Nicaragua’s relations with China, it depends on Beijing, not Managua!”

A shorter print version of this article can be found here.

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