Nail, coffin, Nicaragua Canal

 I am still annoyed that one of my ... uh, not childhood, no, “pre-midlife”? “Early adult”? ... heroes endorsed the Drumpfster. So I will write an unrelated blog post instead.

In the past week, there have been a few news stories which have reduced the odds of a Nicaragua Canal from slim to “Not unless President Eleven goes full Drumpf.” 

First, China published what was accurately called “shocking trade data.” Add that to record capital flight, and the case for blowing part of the current account surplus on a giant prestige project in Nicaragua goes away.

Second, the New York Times published a way overblown article about renewed Contra violence in Nicaragua. Now, the headline is overblown: Nicaragua is not facing a serious insurgency. (To be fair, when you read the article, it is pretty clear that nothing is going on.) But it should remind everyone that the people displaced to build the Red Canal could turn violent if not properly compensated.

Finally, it looks as though cargo ships may not be getting any bigger. If that is right, then what little commercial rationale the Red Canal may have had goes away. (It didn’t have much.)

Kind of disappointing, but there you have it.

Comments

[J.H.]

Interesting. As you have been noting for a while the cards have been stacked against the building of a Nicaragua Canal despite all the rhetoric. Perhaps the project will quietly die as the Chinese investors make use of their guillotine clauses to scrap the Canal but keep the more lucrative side projects.

As an aside, if you still felt annoyed with the recent endorsement of Trump you could distract yourself with yet another unrelated blog post dealing with another country in the region that has seen Chinese investment interest: Jamaica. There was an election recently and the government changed. Why not busy yourself looking at any possible changes in policy (if any) and how this may (or may not) affect the Chinese initiatives as well as regional relations? That should be sufficient distraction. You could even do it as a mini-series of posts if you decide to do something similar about Trinidad & Tobago which also fairly recently changed governments in September (and checking back you hadn't blogged about that).

[Matt McIrvin]

It would have been an environmental disaster, though, wouldn't it? So that's a win.

[Carlos]

Two components regarding the cargo ships: the "freight recession", which had been troubling macroeconomic news, and diminishing returns in port infrastructure, based more on fundamentals of economics of scale.

Container ship design is often a weird shot in the dark for the shipyards, because an inaccurate projection about fuel prices or route volume can leave a firm with a mismatched fleet.

[Peter]

Port facilities place another limit on the size of cargo ships. Not all major ports are able to handle the largest post-Panamax container ships, at least not without very expensive modifications.

[Noel Maurer]

Yeah, that's in the FT article, pretty much. Carlos phrased it well: "diminishing returns in port infrastructure, based more on fundamentals of economics of scale."

In short, the consultants don't think that port operators will think it makes sense for them to pay to be able to access a new generation of post-post-Panamax ships.

I haven't read the article, but it's also probably worth repeating that the newest generation of ships is approaching Malaccamax, which is getting pretty close to an absolute limit. (In fact, the largest container ships are already past Malaccamax in length, but that can be fudged.)