New York attorney Donald Bosco read last week’s headlines from Nicaragua with a sense of mild despair and acute frustration.
After nearly two decades of struggling futilely to move the chains on his company’s plans to build a “dry canal” freight railroad across Nicaragua, Bosco watched in disbelief as the Ortega administration presented a legislative bill to give an unknown Chinese company exclusive rights to a similar project.
“I’m kind of shocked by this,” the president of the Nicaragua Interoceanic Canal Company (CINN) told The Nicaragua Dispatch in a phone interview from his law office in Staten Island, New York.
Bosco says he hopes the Sandinista government and its new Chinese business partner still intend to allow his company to develop its dry canal within the framework of the Great Canal megaproject. But if the Sandinista government tries to give his company the boot for a Chinese substitute, Nicaragua could face an international lawsuit, Bosco warns.
“If we are being swept aside without any legal justification, we are going to assert our rights and take the legal steps we need to take to protect our interests,” the CINN president said. “…Our shareholders are very keen on protecting their interests, so we will see what happens.”
Bosco says his company, whose concessionary terms were defined by the Nicaraguan government in 2001, has not had any contact with Sandinista officials since the administration began courting upstart Chinese company HK Nicaragua Canal Development Investment (HKND Group) last September. Bosco says his latest attempt to communicate with President Daniel Ortega, who in the past was supportive of the CINN dry canal project, was met with silence.
That’s not a good sign, Bosco says. If the Ortega administration is trying to hide its contractual obligations to CINN underneath the red carpet that it’s rolling out for newly formed Chinese competitor, the Sandinistas could end up undermining the investor confidence and rule of law that Nicaragua needs to accomplish such an enormous endeavor as building an inter-oceanic canal, Bosco warns.
“It’s a violation of the law and a violation of the trust that my investors had in the Nicaraguan government to provide us with a fair playing field,” the lawyer says of the sweetheart deal that the Sandinistas are expected to finalized with the Chinese firm later this week. “It sends a message to foreign investors everywhere in the world that even if you have a law governing your project , it can be ignored and swept aside.”
President Ortega last week presented a bill to the National Assembly granting HKND Group an exclusive 50-year concession to design, develop, engineer, finance, build and operate a megaproject combo that includes an inter-oceanic canal, an oil pipeline, a “dry canal” railroad, two deepwater ports, two airports, and a series of free-trade zones. The bill, marked “urgent,” is expected to be passed into law this week by the Sandinista-controlled National Assembly, after a perfunctory consultation process by the commission on infrastructure.
Bosco believes the forthcoming concession for the Chinese company conflicts with the contractual terms that the government granted his company more than a decade ago.
The CINN concession, published in La Gaceta on Dec. 5, 2001, establishes the norms and regulations for the company’s 40-year exclusive concession to “construct, administer, operate and exploit the (dry canal) project with all the rights and protections of the Constitution.” Article 5 of the 2001 regulation stipulates that the government of Nicaragua would grant CINN its full concessionary rights to build and operate the dry canal no later than 30 days after the company is approved for all its feasibility and environmental-impact studies.
There’s the rub. In a classic case of political discontinuity between one administration and the next, the Bolaños administration, which took office in January 2002—one month after CINN’s concession was approved during the eleventh hour of the Alemán administration—blocked the company from moving forward on the project by denying it the permits it needed to access lands for technical and environmental-impact studies. Instead, the Bolaños government went into competition with CINN by promoting its own version of the dry canal project, known at SIT Global.
After five years of gridlock during the Bolaños administration, Bosco was hopeful that the CINN dry canal project would get back on track under President Ortega. Bosco, CINN executives and potential foreign investors met with Ortega several times early in his first term back in office, and were given assurances that the government would support their efforts to restart the project. But Bosco says the administration’s support for CINN waned, and then became outright injurious as Sandinista authorities started to pursue their own plans to promote a Grand Canal Project.
Bosco says the early days of the government’s promotional effort were unpolished and awkward. Sandinista official and Canal Committee Chairman Manuel Coronel Kautz’s first attempted to present Nicaragua’s canal project at the 2012 Colloquium on International Canals and World Seaborne Trade in Brussels was a flop, says Bosco.
“It was appalling,” Bosco says. “I was embarrassed for Nicaragua, even though I am not a Nicaraguan. It was just absurd.”
Bosco says he finds Nicaragua’s courtship of an unproven Chinese telecom company equally mystifying.
“I don’t know who these Chinese are,” Bosco says. “I had meetings in Beijing at the highest levels and the Beijing authorities told me they could not use state money or state-owned enterprises to participate in a project of this size in Nicaragua since there are no diplomatic relations.
“Without diplomatic relations, the Chinese own internal regulations prevent them from offering financing from state-owned companies, the China Investment Corporation, the Bank of China, or any other Chinese financial institutions,” Bosco stressed. “So I am not sure which Chinese entity (HKND Group) is, and what ability they really have.”
While HKND Group and its Managua shell corporation, the Developer of Big Infrastructure Company, remain an enigma both inside and outside of Nicaragua, Bosco says all the investors in his company were required to show personal balance sheets, provide pre-viability studies, participate in hearings before the National Assembly, and conduct community meetings in several municipalities along the proposed route of the railroad. Despite their efforts, Bosco says the project remains stuck in the mud until the government grants them the permits they need to go onto government and private lands to do the tests associated with viability and environmental-impact studies.
“The goalposts have been constantly changed and moved on us, but we continue to persevere and meet every new requirement that is put in our way,” Bosco says. “And we developed the project to the point where we are ready to proceed; for the past few years, we have been asking for the permits to be issued, but they have never been issued so we haven’t been able to conduct our feasibility studies as required by law.”
Last chance to lay rail
While Bosco admits his company no longer knows what to expect from the government, or what the implications of the forthcoming Chinese concession mean for the future of the CINN project, he hopes that Nicaragua’s feverish eagerness to convert its long-frustrated canal dreams into a reality might offer a unique window of opportunity for the $3.5 billion dry canal, which would cost less than one-tenth of the Chinese-built water canal and take a fraction of the time to build.
The megaproject concession combo—canals, ports, airports, and other supporting infrastructure—is going to be way more than a neophyte Chinese company can handle, Bosco says. So it makes sense that Nicaragua and its Chinese partners allow the CINN project, which has a running head start on everyone else, to handle the logistics of the dry canal while they take care of the rest.
“It may take 20 years to build the water canal project, but the railroad will take four or five years to build. So the railroad can be paying for itself several times over before a water canal would even start to operate,” Bosco says, noting that Panama had a railroad line before opening its water canal.
The situation can still be “win-win,” Bosco says, unless the government wants to make it “lose-lose.”
“We are looking at two possibilities: either we are allowed to continue with our project and we are allowed to work within the framework of the Grand Canal project, or we will have to look at our legal options. And the law is clear about the fact that our company would be reimbursed for all expenses and costs if the government stops our project, which apparently they have done by not issuing us the permits despite many requests,” Bosco says.
At the end of the day, the CINN president says, the company and its investors still believe the dry canal is a good idea for Nicaragua, despite their doubts about the government.
“Governments come and go, but the people of Nicaragua are still there and the territory is still there and this is a project that will operate for 100 years,” Bosco says. “You have to look beyond the day to day… we and we are patient and persevere and still hope that we can make this happen.”
Read part I in this series here.