Nicaragua, a Taiwan friend, warms to China investment

Nicaragua's leftist government, which has diplomatic relations with Taiwan, is seeking to lure investments from China -- in part to offset a possible loss of support from its regional ally Venezuela.

President Daniel Ortega's government is heavily dependent on aid from fellow leftist Hugo Chavez in Venezuela, including subsidized oil and preferential terms on long-term loans.

Chavez however faces a stiff challenge in his bid for another term in the October 7 presidential election from Henrique Capriles, candidate from the unified opposition.

Even if he is re-elected, Chavez has battled with cancer for more than a year, and his health remains a question mark.

Since Ortega was re-elected in 2007 Nicaragua has received some $2 billion in Venezuelan aid, according to official figures -- and if elected, Capriles has vowed to review that aid.

"Ortega is getting prepared for a possible reduction in aid from Venezuela" given Chavez's "uncertain" future, opposition lawmaker and ex-foreign affairs minister Victor Tinoco told AFP.

Tinoco said the government is looking at new investors in "all the mega-projects" that it intended to pursue with Venezuelan capital.

Those projects include a $30 billion inter-oceanic canal through Nicaragua to compete with the Panama Canal, and a $6.5 billion petrochemical complex to refine, store and distribute fuel to all of Central America.

One possible replacement for Venezuela is China -- but Nicaragua is one of 23 countries in the world that has diplomatic relations with Taiwan instead of China.

Taiwan and China split in 1949 after a civil war and the two governments have since vied for international recognition. Beijing still considers the island part of its territory awaiting reunification, while Taipei says it is a sovereign state.

Latin America, the South Pacific and Africa have been the main battlegrounds for China and Taiwan, which have accused each other of luring allies away with "checkbook diplomacy."

Managua's ties to Taipei however have not stopped Nicaragua's interest in dealing with China.

In mid-September, Nicaragua said it is in negotiations with China to purchase a $300 million satellite which they hope launch into orbit by 2016.

The project, Nicasat-1, will cost approximately $300 million. The Nicaraguan government plans to seek financing from Chinese banks, which have offered favorable interest rates.

"In mid-October of this year, the two parties are going to conclude the negotiations on all aspects of this contract," said He Xing, vice president of the Great Wall of China satellite company, on a visit to Managua.

Earlier in September, Ortega announced that a Chinese company will conduct a feasibility study on building the inter-oceanic canal.

"This is an extraordinary and very important piece of news that may affect the future not only of Nicaragua, but of Central America as a whole," Ortega declared.

The current plan calls for building a canal from Monkey Point on Nicaragua's Caribbean coast to Puerto Corinto on the Pacific Ocean.

The announcement was made after Ortega met with Chinese businessman Wan Jin, head of Xinwei Telecom, who is interested in a license to operate a mobile telephone network in Nicaragua.

Trade between the central American country of six million and the Asian giant reached $17 million in 2011.

Just as the Chinese government "has shown interest in the Grand Canal project that we are proposing, we also will continue provide openings," said Ortega's son Laureano, an adviser to the government investment agency ProNicaragua, on the government's official website.

In Latin America, countries that recognize Taiwan over China include Paraguay, Haiti and Guatemala. Costa Rica switched diplomatic recognition from Taipei to Beijing in 2007.