Nicaraguan President Daniel Ortega has unveiled plans for a 445-kilometre interoceanic waterway that would provide an alternative to the congested Panama Canal, presenting the proposal to Chinese investors at a regional business summit.

The new route would connect the Caribbean Sea to the Pacific Ocean, beginning at a planned deep-water port in Bluefields on the Caribbean coast. The canal would traverse northern Nicaragua via Lake Xolotlan (also known as Lake Managua) before reaching the Pacific through Puerto Corinto.

The announcement comes as the Panama Canal, which handles around 5% of global seaborne trade, faces significant challenges with water levels and vessel traffic, leading to lengthy delays. "Every day it becomes more complicated to pass through Panama," Ortega told delegates at the XVII China-Latin America and the Caribbean Business Summit in Managua, which drew representatives from 29 countries.

The Panama Canal has experienced a 29% decrease in ship transits over the past fiscal year due to severe drought conditions, according to the Panama Canal Authority (ACP). From October 2023 to September 2024, only 9,944 vessels passed through the canal, compared to 14,080 the previous year.

Nicaragua's ambitious project represents a shift from a previous canal initiative. In May, the government revoked a controversial concession granted to Hong Kong Nicaragua Canal Development (HKND) Group, which had proposed a different route through Lake Cocibolca.

As part of the new proposal, the Chinese company CAMC has signed a contract with Nicaragua's Ministry of Transportation and Infrastructure for the construction of the Bluefields port facility.

The canal project would comprise four segments, with Ortega suggesting it could attract investment from both Chinese and American businesses. He referenced historical precedent for the undertaking, noting that the United States had considered building a Nicaraguan canal as far back as 1854.

Environmental and financial analysts have previously questioned the feasibility of such projects in Nicaragua. However, the government maintains that the infrastructure development would boost regional trade and economic growth.

The initiative emerges as Nicaragua seeks to position itself as a crucial link in global maritime trade, though specific details about funding and environmental impact assessments have yet to be revealed.