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Nicaraguan Canal project loses momentum: Expansions to Panama and Suez Canal reduce need for a second canal in Central America

The idea behind the Nicaraguan Canal dates back centuries, but has always been beaten back by the Panama Canal, initially by the latter’s construction, and secondly by its expansion, which has made the construction of the Nicaraguan Canal less desirable. Whilst the Nicaraguan government has declared the importance of the construction of the canal for the nation’s economy the Hong Kong Nicaragua Canal Development Group (HKND), which is in charge of the construction of the canal, has yet to initiate this construction five years after the project’s announcement. A number of reasons are responsible for this including the expansion of the Panama and Suez Canals, as well as an expansion in the US intermodal network, which has resulted in ports of the west coast of the US increasing their capacity.

With several established maritime routes already available for transportation companies, the Nicaraguan Canal would have to cut its profit margins if it were to serve as a competitor. This would drive prices down and may go some way to explaining why the HKND, after so many years has not even begun construction. If trade volumes between the east coast of North America and East Asia were to rise significantly in the coming years, then the construction of the Nicaraguan Canal may gain importance again. However as it stands, the project seems to be heading towards closure.