28 de marzo 2023
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The Mafia Route: Who controls the canal concession in Nicaragua? is the result of exhaustive investigative reporting conducted over a decade by lawyer and expert in environmental law, Mónica López Baltodano, and political scientist Umanzor López Baltodano, on the corrupt scheme and the 23 shell companies that operate in relation to the canal concession granted by Daniel Ortega through the National Assembly to Chinese businessman Wang Jing and the Hong Kong Nicaragua Canal Development (HKND).
The book traces the origins of the canal concession signed on June 14, 2013, as well as the failure of the canal project following the emergence of the peasant movement's protests, and analyzes the corrupt interests that still exist around Law 840, which remains in force.
In an interview with Esta Semana and CONFIDENCIAL, Mónica and Umanzor López Baltodano highlight “the relevance of this investigation, because it is clear that the Ortega Murillo regime is capable of doing anything, not only to remain in power, but also to enrich itself at the expense of the Nicaraguan State”.
The Mafia Route was launched last Friday at the University of Costa Rica in San José. The digital version is available for free download at the website www.Popolna.org where through a QR code you can access more than 100 appendices, including registry documents, contracts and legislation.
Let's start with the title of the book, which is also the conclusion of this investigation. What do you mean by “mafia route”? Who is the mafia that controls the canal concession that, despite the failure of the canal project, is still in force?Mónica López Baltodano (MLB):
What the book does is make available to the public --to all citizens, researchers and journalists-- all the information that we managed to obtain throughout these last ten years to document the existence of 23 shell companies registered in different tax havens in Hong Kong, Beijing, Shanghai, Netherlands, Cayman Islands and Nicaragua. All of them coordinated to build a corrupt network to manage the canal concession. In the end what they do is put the most valuable assets of Nicaragua into the hands of this network of shell companies. In more than 100 appendices and 2500 pages, the book documents all the available information, which we hope will be of use to the huge anti-corruption and pro-human rights struggle being waged in Nicaragua.
Ortega’s, Wang Jing’s, Xinwei’s and HKND’s business initiative
The book describes how the law was passed, as well as Wang Jing's relationship with HKND -- which is also mentioned as HKC and has other names--, but at the end of the day, who controls the concession?
Umanzor López Baltodano (ULB): What we did in the book was to break down, step by step, the concession process. We know that Wang Jing, this Chinese businessman, is presented as the final concessionaire, but behind the concession there is a complex scheme to cover up the high-level corruption managed by the Ortega government. We even documented how there are high-ranking officials of the regime within the concession process. In particular, Minister Iván Acosta is a director of one of these shell companies that has less than a dollar of capital registered in the Cayman Islands.
But it was the National Assembly who granted the concession with the Law 840, and then on the other side, there is Manuel Coronel Kautz, representing what, according to another law, is the highest authority of the Nicaragua Canal.
MLB: What we were able to demonstrate, with all the information we had access to in the commercial registries in all the countries I mentioned, is that there was a perverse synchronization between the creation of all these shell companies --that are to this day the owners of the concession of the Interoceanic Canal-- and the political decisions of the regime. In the book you can see the complete chronology where it is clear that this whole scheme is set up to facilitate the privatization and administration by these shell companies of invaluable assets that belong to the people of Nicaragua, among them: the management of the great Lake Cocibolca, of protected areas, and of entire communities that belong to peasant farmers, indigenous and Afro-descendant people. And that is why we insist on the relevance of this publication, because it is clear that the Ortega Murillo regime is capable of doing anything, not only to remain in power, but also to enrich itself at the expense of the Nicaraguan State.
When we talk about corruption, there is an illicit, lucrative element at play in this negotiation of national sovereignty. There are reports that there was a US$20 million bribe to get the law approved, which was given to Ortega-Murillo for facilitating the operation. Is there any evidence in the investigation of this type of lucrative action?
ULB: The book doesn’t go into these specific details, but we can trace central elements of Wang Jing's secret negotiations with Ortega, which date back many months before Law 840 went into effect. In fact, Law 840 basically just put into effect what had already been secretly negotiated. The book deals with elements of how this negotiation took place and even, as Monica pointed out, the agreement under which public decisions were made and coordinated, such as the appointment of Colonel Kautz and the creation of the concessionaire company in Hong Kong, within 24 hours of each other.
The web of 23 shell companies
The book describes the existence of 23 shell companies registered in Grand Cayman, Virgin Islands, Hong Kong, Beijing, the Netherlands and Nicaragua. Monica, in the book you tell the story of going to the Netherlands to visit one of these companies. What did you find?
MLB: I had the opportunity to go to one of the registered headquarters of the Dutch companies. It was a totally absurd incident. At the front desk I was told that they had orders not only to attend not to me, but that I was to leave the premises immediately. They were the offices of a company called TMS Group, which acted as a public manager of this network of companies of the canal concession. They made me leave, refused to give me any information, and did not respond to any of the requests for access to public information. But several years later, that same company disassociated itself from the canal project, as did ERM. That is to say, during the course of the process, large companies that were linked to the concession decided to withdraw, I imagine because of the damage that the level of corruption associated with the canal concession could cause to their public image.
The canal was a failure, but the concession remains in force
In the book you say that the company HKND –in which, among others, Ivan Acosta, the Minister of Finance, was involved-- was dissolved, that it ceased to exist in 2019. If HKND doesn’t exist, who is the current recipient or owner of the canal concession?
ULB: HKND was registered in the Cayman Islands. It was the central company of the concession. An update of the 2021 investigation, conducted at the beginning of 2022, showed not only that HKND, but all the other shell companies registered in the Cayman Islands, are crossed out of the registry and have ceased to exist, at least since October 31, 2019. Unfortunately, we have not been able to trace where the corporate network subsequently connects. We did discover that there are other closely linked companies with very similar names and that they are most likely the continuity of the concession through these new companies. The invitation remains open to deepen this investigation, both through Nicaraguan public records as well through other international sources, to really shed light on the state of that corporate network after the well-known fall into disgrace of Wang Ying, who lost millions of dollars and has been subject to sanctions and expelled from the Shanghai Stock Exchange, as we also documented in the book.
Read: Nicaraguan rural leaders still fighting canal project law
This project failed, not only because it failed to raise even a tenth of the US$50 billion that they said the canal project would cost, but fundamentally because there was a social protest in the country that called into question its very validity and viability. That is, the creation and uprising of the peasant movement during these ten years of struggle doomed this project. You dedicate this book to Migdonio and Francisca Ramírez. What impact has this movement had on the failure of this “mafia route”?
MLB: I am convinced that the existence of the anti-canal peasant movement and the massiveness of their protests --more than a hundred marches-- were decisive for the concession not to advance in the terms in which the regime had proposed. The forceful resistance of the Nicaraguan environmentalist community, of academics, of the independent media, of human rights defenders, of the Indigenous and Afro-descendant communities who also exercised their rights--all these efforts over ten years have contributed to the fact that the regime has not been able to advance on the ground with the construction of the wet canal. However, our responsibility as lawyers is to remind the Nicaraguan people that the canal concession is still in force ten years later, even though the wet canal has not been built.
This book demonstrates that the web of corruption is set up for profit at the expense of the country's interests and that is why our mission with the publication is precisely to raise once again the issue of the quest for justice in Nicaragua. Documenting the corrupt actions of the regime is key. The invitation is for those who have access to information and those who can document, to continue systematizing acts of corruption because when we achieve a democratic transition in Nicaragua, just as the dictatorship will have to pay for the murders, arbitrary detentions and torture, it will also have to pay for the acts of corruption it has committed throughout all these years.
The same Law 840, however lenient it may be, allows the State of Nicaragua to cancel this concession because the project was not carried out, the funds were not collected, so this is a matter of political will. The Government does not cancel the concession because it wants to keep it alive. These subprojects that are covered under the canal law, can Wang Ying tomorrow transfer or sell them to another company, to another government?
Umanzor López Baltodano: The same framework agreement in Law 840 establishes that after a period of time, which if I remember correctly, ended in 2019, the Government of Nicaragua, could have ended the concession and the law completely if the works had not started. However, the interest is that the concession is maintained, because, in effect, what the canal concession does, is cover up a complex web that facilitates grand corruption.
The business is to draw attention to the canal, but in reality, to continue executing its projects in different areas, whether in the creation of hotels, creating alternative market routes and of course, and here we enter perhaps into speculation linked to geopolitics, also to allow these partners linked to the authoritarian bloc to which Ortega fully subscribes, to offer areas of influence that can be decisive for this geopolitical zone. We are obviously talking about powers such as China, but also about Russia, with whom the relationship has really come closer in a notorious way. In short, Nicaragua is part of an authoritarian bloc led by Ortega where this concession can be very useful for different geopolitical interests in this context.
The connection to the People's Republic of China
Wang Jing presented himself from the beginning supposedly as a global entrepreneur based in Hong Kong, but everyone knows that he was based in Beijing and that at the time he also had connections to the Chinese Communist Party and to the Chinese Army, as a service provider through the company Xinwei. But the People's Republic of China has never admitted to having any links to this project. However, following the establishment of diplomatic relations with China, Daniel Ortega, the Minister of Finance and other senior government officials have talked about the project being kept alive and that there is Chinese interest in reviving the canal project, but the People's Republic of China says nothing about this.
Mónica López Baltodano: This has to be analyzed in light of the rise of diplomatic relations of the Central American region with the People's Republic of China. As of today, Costa Rica, Panama, the Dominican Republic, El Salvador, Nicaragua, in 2021, and now Honduras, in 2023, have suspended their relations with Taiwan in favor of relations with China. That is the first fact: China has interests in the region. Then, once the reestablishment of diplomatic relations has been signed in December 2021, Nicaragua, in the hands of the Ortega Murillo regime, signed up to the Belt and Road initiative (the "New Silk Road"). On January 10, 2022, both governments signed a framework cooperation agreement in which the Belt and Road is a pillar of that structure. And in that sense it must be said that a concession of this size and scope in private hands, as we show in the book, can be of enormous geopolitical interest. And although the Chinese Communist Party, throughout these ten years has insisted that they have no correlation whatsoever with the canal megaproject, the truth is that from the beginning, Chinese state-owned companies were indeed linked to the concession.
To mention a few: China Railroad Construction Corporation, was linked to the feasibility studies; Xuzhou Construction Machinery Group (heavy machinery); China Railway Siyan Survey and Design Group (design of the dry canal subproject); Civil Aviation Engineering Consultancy Company of China (design of the airport subproject); Second Harbour Consultants (design of the port subproject); among others that are mentioned in the book.
In other words, while they claimed that China as a State was not involved because at that time Nicaragua had diplomatic relations with Taiwan, in the concession and in the process of implementation and feasibility studies, there were Chinese state-owned companies involved. The big question is, now that Nicaragua and China have diplomatic relations and have signed the adherence to the Belt and Road, as a strategic geopolitical initiative of China, how are those interests going to be connected with this huge blank check that is in the hands of this network of “shell companies”?
In the prologue to this book, Dr. Alberto Cortés, of the University of Costa Rica, warns that although we are living through another geopolitical moment due to the antagonism between China and the United States, “a second canal in this part of the planet would hardly be viable if it does not involve an agreement between the United States and China, in which Nicaragua would possibly have a clearly subordinate role”. But, practically speaking, we are already in another league.
Umanzor López Baltodano: It is true that China's interest in Nicaragua may not be immediate. But we have to remember that the Chinese Communist Party also works in the medium and long term. And really, the rivalry with the United States, which is going to mark the geopolitical future for the rest of the 21st century, is going to increase.
And for China most definitely, but also for other much more aggressive powers, such as Russia, having the possibility of using a corrupt framework in Nicaragua, such as the one that the concession allows, is really very useful to fuel that rivalry, which has become increasingly powerful, especially since February 2022, when Russia invades Ukraine. We are in a different geopolitical map than ten years ago, and we believe, in this case, that it is extremely important to understand that the canal concession also puts the stability of the area at risk, the stability of Central America.
This article was originally published in Spanish in Confidencial and translated by our staff.
