The combination of high cost, social controversy, environmental concerns, and an unstable political environment helped push the project into limbo, leaving the “Panama alternative” as an idea of enormous scale but stalled execution.
China in the Region: Logistical Influence, Disputes in Panama, and Energy in Nicaragua
Even without the canal, China’s presence in regional infrastructure is evident in multiple locations. In addition to serving as a gateway for 40% of containerized cargo to and from the United States, alternatives are re-emerging in this scenario, with China emerging as a central player in projects, concessions, and disputes over influence.
The Panama Canal Bottleneck and the Magnitude of the Problem
For months in 2024, intense heat and lack of rainfall reduced water levels in the Panama Canal, forcing the country to allow fewer ships to cross it. Any large-scale alternative directly impacts time, cost, and bargaining power in global supply chains.
Nicaragua’s Economic Discourse and the Promise of Transformation
From a domestic perspective, the Nicaraguan government argued that the canal would create tens of thousands of jobs and boost the economy, in a logic similar to the role of the Panama Canal. One plan envisioned linking Lake Nicaragua to the Pacific and Atlantic Oceans via approximately 201 km, but it faced protests, environmental risks, and was halted in May 2024.
China’s Return to the Center of Discussions
China returned to the center of discussions when the 2024 drought brought the water level of the Panama Canal to its lowest point and forced the country to allow fewer ships to pass. The plan would involve cutting across the country, connecting Lake Nicaragua to the ocean via a trench estimated to be about 201 kilometers long, in a jungle region in Nicaragua. The channel promised to be three times longer and twice as deep than the Panama Canal, allowing the passage of large container ships and oil tankers that “simply won’t fit” in the Panamanian structure.
The Project in Nicaragua and the Approximately 200 KM Long Trench
The most ambitious alternative, however, would be the Nicaragua Canal, with an estimated cost of US $40 billion and mentions that it could reach US $100 billion. It was a complete infrastructure system designed to redraw the map of maritime routes.
How China Entered the Plan and Why 2013 Became a Turning Point
The idea of a canal in Nicaragua is not new. There are references to maps from 1870 with proposed routes and to the fact that the United States considered Nicaragua before opting for Panama at the beginning of the 20th century. What changed is the renewed interest and, above all, the connection with China. In 2013, the project gained prominence following an agreement linked to a Chinese billionaire, Wang Jing, described as the Minister of Telecommunications, with the Nicaraguan government, in a move cited as being worth US$50 billion. The concession to build the canal was reportedly granted for 50 years to a Hong Kong-based company, HK Nicaragua Canal Development Investment, which is linked to Wang Jing. President Daniel Ortega is cited as a proponent of the idea that the canal would lift Nicaragua out of poverty and put the country on the path to development.
What Stalled the Plan and Why did it Formally End in 2024?
Despite the symbolic opening ceremony in 2014, it is reported that no real work has progressed at the site of the future canal. At some point, teams would have started excavating access roads near the planned route, but the construction of the waterway never took place. The information also indicates that only 17% to 18% of the work had been completed during the period mentioned. Almost a decade after the proposal began, the concession linked to the Chinese businessman was terminated in May 2024.
The Environmental Risk in Lake Nicaragua and Criticism of the Pace of Studies
Environmental criticisms focus on two main issues: freshwater and bio-diversity. There are warnings that the canal could deplete the country’s most important freshwater reserves and destroy protected natural areas. Since the lake would be too shallow for supertankers to pass through, it would be necessary to dredge the bottom, risking the destruction of sediments, polluting the water, and affecting local species. Opening the lake to the Atlantic and Pacific oceans is also associated with the risk of invasive species entering, threatening native fish and an ecosystem that might not recover. Furthermore, critics point to damage to wetlands and forests vital for the survival of indigenous communities. A recurring criticism is the evaluation time. Although studies have been conducted, it is mentioned that everything was done in just a year and a half, while smaller projects would take longer for review. As a comparison, an old sea-level canal plan in Panama, proposed in the 1970s, is cited, which would have required 10 years to determine ecological viability and was eventually cancelled.
The Social and Political Crisis: Land, Protests, and Indigenous Communities
The plan has generated debate and controversy from the start. One of the most explosive points was the fear of losing land and livelihoods. Thousands of farmers protested against land confiscation. The impact on indigenous peoples also appears to be at the heart of the impasse. The approved route would have 52% passing through indigenous territories, including lands belonging to the Miskito Rama and RAM Creole communities. There is also mention of approximately 10,000 Nicaraguan indigenous people killed in attempts to defend their lands and way of life. The anger surrounding the project is cited as one of the triggers for the growing public discontent with the Ortega government, which culminated in massive protests in 2018. This episode reinforced the interpretation that the canal would cease to be merely an infrastructure project and would become a catalyst for internal conflict. There is mention of a law that would have given the project the right to forcibly seize land and water routes anywhere in Nicaragua, and within this framework, the possibility of the forced relocation of 120,000 people emerged.
The Alternative to Mexico that has Advanced as an Interoceanic Corridor
Among the alternatives discussed is the interoceanic corridor in Mexico, built in the narrowest part of the country between the Pacific and Atlantic oceans. The corridor would connect the ports of Salina Cruz and Coatzacoalcos in Veracruz, and is described as being capable of handling 1.4 million containers per year. The proposal links deep-water ports with railways, highways, three airports, a gas pipeline, and a fiber optic network.
China’s Presence Outside of Panama
Outside of Panama, China’s logistical presence is evident in the port of Chancay, Peru, developed by Cosco Shipping Ports, with its inauguration scheduled for November 14, 2024. The port is described as being able to handle around one million containers per year in its first phase and, upon expansion, could redirect trade between Latin America and Asia, bypassing the Atlantic and Panama. In Panama, China is also associated with projects outside of the ports, such as a fourth bridge over the Panama Canal, north of the Bridge of the Americas, cited as a project of a Chinese company, in a deal described as being worth approximately US$1.42 billion.
Economic and Geopolitical Dimensions
The logistical motivation is evident in the background: the Panama Canal shortens transport by weeks between Shenzhen, China, and the east coast of the United States, or between San Francisco and New York. The idea was to connect the Atlantic and Pacific oceans and, at the same time, reduce the chaos of queues and congestion seen in the Panama Canal. Panama actually made a lot of money in the process. Between October 2023 and September 2024, 21% of the goods that passed through the Panamanian waterway were estimated to be to and from China, with the United States still remaining the main user and investor, with a volume described as three and a half times greater than that of China. In 2023, China is estimated to have invested US$1.4 billion in Panama, four times more than since the initiative’s launch in 2017, while American investments, although larger, are estimated to have fallen during the same period.
Impact on Global Supply Chains
Congestion, accumulated delays, and freight costs are being driven up by a bottleneck impacting critical commercial centers. When passage is restricted, the effect is not limited to Panama: it reverberates in the rhythm of global trade. Approximately 5% of global maritime trade passes through the Canal. Up to 14,000 ships pass through it each year to avoid the long and expensive journey around South America. Around the Panama Canal, there are five container ports operated by foreign companies. The three main ones are Colón, Rodman, and Manzanillo, managed by companies from Singapore, Taiwan, and the United States. The tension includes the assessment that the National Security Law adopted by China in 2020 could allow it to exert influence over companies in the event of conflict, fueling fears that China will use strategic port assets to restrict access for US military and commercial vessels.
