FreightWaves Classics articles look at various aspects of the transportation industry’s history. If there are topics that you think would be of interest, please send them to fwclassics@freightwaves.com.
The many industries that make up the world of freight have undergone tremendous change over the past several decades. Each week, FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.
In this week’s edition, from the March 1997 issue of American Shipper (Virtual Page 80), FreightWaves Flashback glances back at Nicaragua’s ambitious plan to build a “dry canal” between bicoastal intermodal ports, rivaling the 3,000-mile U.S. landbridge system.
An investor group has begun feasibility studies for a pair of new containership ports on Nicaragua’s Caribbean and Pacific coasts, linked by a rail line, or “dry canal,” across the country.
The $1.5 billion project is a private-sector venture headed by Don M. Bosco, a New York lawyer. Backers of Bosco’s Canal Interoceanico de Nicaragua have spent $5 million so far, not counting engineering surveys now in progress.
“We want to build a new transportation system specifically designed to handle container traffic,” Bosco said.
The project is a long way from reality. But interest in an alternate route across Central America has increased as the date nears for the December 31, 1999, trade of the Panama Canal to Panama.
Bosco said he doesn’t see the Panama Canal as his group’s primary competition.
“Comparing our project to the Panama Canal is to confuse an apple with an orange,” he said. “Our competition won’t be the canal. Instead, we intend to take significant business from the 3,000-mile U.S. landbridge system.”
Bosco’s backers want to build and dredge twin container ports, “one a mirror image of the other,” at Punta del Mono, on the Caribbean, and at Pie de Giant, on the Pacific.
“They are both greenfield sites now,” he said. “Each port will have four cranes, capable of simultaneously loading and unloading vessels. A 210-mile rail line will connect both ports.”
Project timelines
The rail route would cross Nicaragua not at its narrowest point, but over the “least sensitive terrain environmentally,” Bosco said. “That happens to also be the best route for a railroad in terms of grading. We want no more than a two percent grade.”
Diesel electric locomotives would haul intermodal trains at 70 miles per hour, 24 hours a day, Bosco said. “Spanish and French rail operators have already expressed interest in running the trains,” he said.
His company plans to finish engineering studies by early 1998, complete construction of the terminals and rail line by 2002, and pay off debt and investors so that the ‘dry canal’ operates in the clear by 2010.
Bosco’s principal partners and investors include William Ziegler, a lawyer, and Douglas Hamilton, a venture capitalist, both in New York; Parsons Brinckerhoff, based in Seattle; Besix, in Belgium; Entrecanales and RENFE, both in Spain; Andrade Gutierrez, in Brazil; China Construction International Corp., in mainland China; the Japan Container Association; Alcatel, in France and Germany; and China Merchants Holding, Inc. in Hong Kong.
Container Savings
It currently takes about a day for a vessel to sail through the Panama Canal, which just hiked its tolls 8.2 percent and will raise them again next year by 7.5 percent. The rail journey across Nicaragua would require four hours, but unloading from a vessel on one coast and reloading on the other coast could take a whole day.
“We’re not offering savings in time as much as in overall transportation costs for a container,” Bosco said. “It currently costs $900-$1,000 to ship a container via landbridge across the U.S. We figure that we can do it for $500 a container and still come out with a handsome rate of return.”
Anthony Frost, a London shipping insurance broker who is one of Bosco’s investors, said East-West container trade has grown six to eight percent each year since 1990, but “has been progressively impacted by the delays and costly bottlenecks in moving traffic across the barrier of the Americas.”
Noting that shipyard orderbooks globally now list 36 “post-Panamax” containerships, Frost said “it’s not a question of, ‘If you build the dry canal, will they come?’ They’ll come, all right.”
Tommy Thomsen, president of Maersk, Inc., said that “if the Nicaraguan ‘dry canal’ becomes a reality, Maersk would think most seriously of reconfiguring its world routes. We would look particularly hard at establishing feeder service up and down the coasts.”
Second choice
Nicaragua was not the first choice of Bosco’s company. “We looked at Costa Rica, starting in 1991,” Bosco said, “but we were never able to get approval there, for a variety of political and environmental reasons.”
Then development officials in Nicaragua told us, “if you site it in Costa Rica, they’ll use Nicaraguans to build it anyway. Why not just move the ‘dry canal’ our way, and be done with it?”
The government of Nicaragua approved the commencement of feasibility studies only after requesting letters of intent from five backers of the project, each promising to commit — now, if necessary — from one to five percent of construction costs. “We were able to give them 16 letters of intent,” Bosco said.
Nicaraguan economists have estimated that the ‘dry canal’ will employ 20,000 workers at the peak of construction, and provide 6,000 to 7,000 permanent jobs thereafter. The United Nations Development Program has signed one of its rare pacts with a private developer. Francesco Vincenti, chief of the UNDP in Managua, confirmed that his office will advise and oversee “any cultural and environmental concerns.”
Political Plum
Would the government of Nicaragua ever seize the ‘dry canal’?
“Needless to say, that’s not in our thinking at this time,” Bosco said. “The civil war is over. We will be insured against political risk. However, Nicaraguan officials see this as a very good thing for their country.”
There are ghosts of past failures.
Before the Panama Canal was built, the U.S. Senate narrowly rejected Nicaragua as a site for a canal after promoters of the Panama site displayed a stamp depicting an active Nicaraguan volcano. In fact, one dormant volcano slumbers near the proposed ‘dry canal,’ but it is not considered to be “even a minor risk,” Bosco said.
In the 19th century, Vanderbilt money financed a water route over Nicaragua, using steamboats up the San Juan River, crossing rapids and in the interior, Lake Nicaragua. Travellers covered the last part of the journey by stagecoach on a macadam road that still remains. This was an alternative route to the California gold rush.
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