The 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 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.
China planned the Nicaragua Canal as an alternative to the Panama Canal, crossing Lake Nicaragua in a project that has divided global opinion.
The Project in Nicaragua and the Approximately 200 KM Long Trench
However, the most ambitious alternative 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. The message is straightforward. Without robust data, especially on water quality and flow in Lake Nicaragua, the risk of environmental surprises increases.
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. On February 25, 2025, representatives from the Ministry of Energy and Mines and the state-owned China Communications Construction signed a credit agreement for the Elbar wind farm project, planned with a capacity of 55 megawatts in the northern department of Estelí, in a region cited as being at an altitude of 2,600 feet and with strong winds.
This trench would link a large lake to the ocean, as an alternative to the Panama Canal, a project surrounded by environmental, political, and financial uncertainties. When passage is restricted, the effect is not limited to Panama: it reverberates in the rhythm of global trade.
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. 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.
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. Panama actually made a lot of money in the process. 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.
A fourth bridge over the Panama Canal, north of the Bridge of the Americas, is cited as a project of a Chinese company, in a deal described as being worth approximately US$1.42 billion. Investment figures also enter the debate: 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. 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.
With the 2024 drought reducing ship traffic in the Panama Canal, China entered the debate about alternative routes. The project has generated criticism, including the interpretation that it could increase pressure on the canal, while Chinese authorities have denied any interest in violating Panama's sovereignty. 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 canal is described as an essential route for the global shipping industry. Approximately 5% of global maritime trade passes through the Canal. 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. 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.
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, in a ceremony attended by Xi Jinping and Peruvian President Dina Boluarte. 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. With this story as a backdrop, critics argue that the project would increase displacement and tension in already vulnerable areas.
The Environmental Risk in Lake Nicaragua and Criticism of the Pace of Studies
Environmental criticisms focus on two main issues: freshwater and bio-diversity. Lake Nicaragua appears as a central element. It is described as the largest lake in Central America, a source of water for all Nicaraguans and, at the same time, a source of food for indigenous communities living on its shores. To allow supertankers to pass through the lake, 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. The jaguar is cited as an example of impact: the project would divide populations in half, and biologists describe fragmentation as an enemy of biodiversity because it reduces populations and disrupts gene flow. Furthermore, critics point to damage to wetlands and forests vital for the survival of indigenous communities.
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. 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. The episode reinforced the interpretation that the canal would cease to be merely an infrastructure project and would become a catalyst for internal conflict.
In this context, the promise to 'double the GDP' is presented as justification for a megaproject capable of repositioning the country, even though its absolute size would remain small compared to larger economies. The approved route would have 52% passing through indigenous territories, including lands belonging to the Miskito Rama and RAM Creole communities. The impact on indigenous peoples also appears to be at the heart of the impasse.
In the economic field, the 'One Belt, One Road' initiative, described as the new Silk Road, is presented as an engine of influence. It is reported that it already has 147 participating countries, representing two-thirds of the global population and 40% of the world's GDP.
The social contrast is starkly revealed in the numbers. Nicaragua is ranked among the world's poorest countries, according to a 2024 ranking that places it 58th on the overall poverty list. Among North and South American countries, Nicaragua is described as second worst in poverty, behind only Haiti. GDP per capita is cited as US$813, compared to US $85,500 in the United States and US $447,197 in Panama.
There are warnings that the canal could deplete the country's most important freshwater reserves and destroy protected natural areas. 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. Critics point out that 22 endangered species live in the affected area. 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. This is a recurring criticism of the pace of evaluation.
The strategy is to compete on cost and time. The effect was immediate. There were queues, delays, soaring shipping costs, and a debate about the resilience of the hemisphere's most strategic route. Congestion, accumulated delays, and freight costs are being driven up by a bottleneck impacting critical commercial centers. The tension spilled over into politics. Almost a decade after the proposal began, the concession linked to the Chinese businessman was terminated in May 2024.
