As China and the United States vie for influence and access in Latin America, the Panama Canal has reemerged as a strategic chokepoint. Washington is moving to limit Beijing’s access while China scrambles for other options. Sensing an opening, Managua has revived its long-dormant dream of a Nicaraguan canal as an alternative to Panama’s waterway.
Nicaragua’s Lost Chance
In Latin America, the word canal almost always brings Panama to mind — but that wasn’t always the case. Nicaragua was also in the running when the United States set out to build an interoceanic waterway in the hemisphere. It was a close call, but President McKinley ultimately backed Panama, citing the existing railroad across the Isthmus and the remnants of earlier French construction.
Nicaragua’s reasoning for building a canal mirrors other projects designed to chip away at Panama’s control over hemispheric maritime logistics. Projects like the Central and Capricorn Bioceanic Corridors in South America or the Interoceanic Corridor in Mexico, which all seek to compete with Panama’s railways and ports.
Whether or not these projects are able to achieve that, Nicaragua has been pushing the idea long before the Panama Canal got caught up in the U.S.-China rivalry. Its authoritarian turn has only made the prospect more feasible. By consolidating power and sidelining dissent, the country’s co-presidents Daniel Ortega and Rosario Murillo have worked to keep the canal dream alive — and in the process, have carved out space for Beijing to play a significant role.
Beijing’s Role in the Grand Canal
In 2012, Nicaragua unveiled its Grand Interoceanic Canal Project, setting up a special framework to move the plan forward. A year later, the government granted a 100-year concession to a Hong Kong-based company, HK Nicaragua Canal Development Investment (HKND), led by Chinese telecom tycoon Wang Jing.
Many saw HKND and Wang’s 100-year control over the canal as a concession of sovereignty. As time passed, others started criticizing the project as a scam. Works were supposed to start in December 2014 and be completed by 2020, but in a dramatic turn of events, Wang lost close to 85% of his fortune in 2015 – that is, 9.1 billion dollars – in the Chinese stock market.
In 2018, HKND closed its offices in Hong Kong, but its concession to build the canal technically remained. In 2021, Wang’s telecom company Xinwei was delisted from the Chinese stock market amid claims that Xinwei was serving as a spearhead for Chinese operations abroad, including in Ukraine, Tanzania, and Nicaragua.
That same year, Nicaragua switched diplomatic recognition from Taiwan to China, with the canal project among the incentives for the decision. Since then, Nicaragua has become China’s closest ally in Central America, even pushing for Beijing’s observer status in regional institutions.
Opposition Grows at Home and Abroad
Criticism of the canal has mounted — not only over sovereignty concerns but also from environmentalists, rural workers, and indigenous groups. Land seizures sparked protests, arrests, and displacement. If built, the canal is estimated to uproot some 120,000 people.
Indigenous groups even took Nicaragua to the Inter-American Court on Human Rights (IACHR). During the proceedings, Nicaragua’s descent into authoritarianism became more evident, particularly after the 2018 protests.
In 2021, Nicaragua withdrew from the Organization of American States, effective in 2023. The following year, the IACHR ruled that the canal project violated Indigenous property rights and lacked free, prior, and informed consent.
By 2024, after more than a decade of delays, the government revoked HKND’s concession. Still, the dream of a Grand Canal persists, and the regime has shown itself willing to leverage Chinese investment—though it remains unclear whether Beijing will remain involved.
The Canal’s Uncertain Future
In the current geostrategic landscape, China’s concerns about future access to the Panama Canal and its surrounding logistics network are real. In theory, a Nicaraguan Canal could offer a reliable alternative. The country is firmly aligned with Beijing and willing to confront Washington.
On paper, the project could compete with Panama’s canal in distance and cost efficiency, even outperforming South America’s planned bioceanic railways in some ways. Yet megaprojects of this scale face more than financial hurdles — predictability is crucial.
While Brazil, Peru, and Bolivia are all governments amicably engaging with Beijing, their democratic systems suggest that partnerships can change very fast. Within the next year, all of them will go to the polls and elect a new president. In all those countries, opposition figures are willing to revisit their China policies.
Nicaragua, by contrast, seems to be more predictable — at least on the surface. Ortega appears to be grooming Rosario Murillo and their son, Laureano, as successors. The regime has also shown willingness to grant China long-term control over projects. But authoritarian regimes can collapse suddenly, adding uncertainty.
Another complicating factor is that Beijing may not want to provoke Washington by pushing a canal in what has long been considered the U.S. sphere of influence. Combined with the other challenges that make the project difficult to realize, the future of Nicaragua’s Grand Interoceanic Canal remains uncertain — for now, it appears to be little more than a grand dream.
Alonso Illueca is CGSP’s Non-Resident Fellow for Latin America and the Caribbean.
