During the 15th century, the Spanish caravelas required an alternative route towards its colonies in Peru. The usual trip would go around Cape Horn, surrounding the South American continent, only to follow north once the Pacific Ocean had been reached at the very bottom of Chile. The trip was not only long but also expensive. The passage through Portuguese territories involved high payments of tariffs to every vessel. The Spanish Empire, aware of the short length of some Central American countries, became to wonder if it was possible to create a manmade waterway from one ocean to the other. Little did they know that the idea of such route was not only possible, but also profitable. It was only still ahead of its time.
A couple of centuries later, the French diplomat Ferdinand de Lesseps raised massive amounts of financial support for a canal that would unite both oceans. Panama was the chosen location due to the climate and soil conditions. A 77- kilometer strait would be demolished with the intention of building a colossal engineering project to accelerate the flow of supply goods. Lesseps was confident about the plan mainly because of the incredible success of his last related project; the Suez Canal. Although the French were the first to become interested in the Panama Canal, all of their engineering designs failed due to high death tolls left after excavations, diseases and accidents in the Panamanian jungle.
In the 19 th century, the United States tried to take over the project. Theodore Roosevelt pursued a construction concession with the recently independent Great Colombia (at present day Panama, Ecuador, Colombia and Venezuela). At that time, proud of their recent independence, the then president Simon Bolivar rejected the North American offer and tried to focus on the well being of a newborn society.
However, this rejection yielded disagreement from the Panamanian territories and notions about a separation from the Great Colombia were born. With the help of US intervention, Panama had its independence from Colombia in 1903, and the interest about linking both oceans, arose again.
The canal would not only serve as a passage from the Caribbean Sea to the Pacific Ocean and vice versa, but will also involve massive amounts of revenues and a forever shift in the supply management logistics of the Western Hemisphere. The shortcut would relatively plummet shipping times and the trading process will be shortened, opening the door to a faster globalization. Before the shortcut, a trip between New York and San Francisco would normally had to sail around South America. With the canal, that same trip would be sliced by almost 13,000 km, making it only around 6,000 kilometers long.
After the Panamanian independence in 1903, the US obtained immediate authorization to begin the project. After various legal issues, accidents, doubts and more than 5 thousand deaths, the canal was finally opened on August 1914. Since that moment, the canal began to operate under US control.
The Panama Canal was the trophy that the United States needed to show off its potential as a new world power. International journalism sent the signal: “The Americans have just achieved what the French could not”. It was a message to the world that a new powered-economy was emerging, and old were the days with Europe as the only dominant continent. A manmade waterway of that size meant a new step forward for humanity over nature. It was the beginning of a new order within international trading.
The US delegated control of the canal to Panamanian authorities in 1999, following the Torrijos-Carter Treaties. Nevertheless, after the transition of administration, the Panamanians followed a different operative path. Instead of using the canal as a cost minimizer to increase the amount of crossings, the Panamanians chose a profit maximizing approach. The total price to cross the canal has risen by 66%, and its surroundings have been modified from a military zone to a touristic area. The Panamanians were determined to extract as much wealth as they could from that beautiful piece of engineering, and after 17 years of self-managing, they even managed to expand it in order to increase capacity.
As a result of the outstanding success of the Panama Canal, the idea about a second canal came to float. The Nicaraguan Isthmus became the favorite location for a new shortcut. An isthmus consisting of 278 kilometers from one coast to the other. The Nicaraguan president Daniel Ortega, organized a contest between the interested investors. Wang Jin, a Chinese billionaire won the contest by proposing a $40 billion dollar project. Ortega, convinced of the economic gains surrounding a transoceanic canal, commenced to facilitate the conditions required.
Since the project needed the support of the Chinese government, Jing used as an argument the reduction in maritime tariffs from Venezuelan oil. Due to diplomatic disputes between the Venezuelan and US governments, the US had used its immense influence over the Panama Canal to try to halt the export of Venezuelan fossil fuels as much as possible. China in turn, being one of the largest oil loyal customers of Venezuela, desired an alternative route, or an alternative canal.
The existence of a second bridge linking the two most transited oceans will mean another shift in international trade. The prices of the supply of goods will be set by a competitive game between two trading doors. It will be inevitable for both canals to maintain below market prices due to increased competition, therefore yielding a massive increase in trade flow once again.
Chinese involvement in a region previously known as the United States backyard has been considered a signal by the Chinese to show off its constant increasing influence. A new step in the staircase of Chinese domination and a message sent to the rest of the world implying that a new economic power is emerging. Just as once, the US did.
The Nicaraguan Canal is only one example of the recent increase in Chinese influence over Latin America. President of China Xi Jinping stated that more than 250 billion dollars would be invested in Latin America from China over the next decade. China has already surpassed the US as the largest export market of Brazil, the strongest Latin American economy today. Many economists begin to wonder if this new economic dependency will have similar results to that of Europeans or North American imperialism.
China has proven them wrong. It has become an attractive investor because of its non-interference approach, staying away from the domestic affairs of its partner countries. It is important to mention that due to poor governance and heavy corruption, most of the countries in Latin America have a hard time securing international financing, but China extracts benefits not only from direct revenues. They build desperately needed infrastructure and later use it to transport raw materials for their own growing economy. It is a win-win situation. The time is optimal for a fit between these two economies. Expect an even higher increase of Chinese involvement in Latin America, while the world welcomes a new economic, political and cultural power.