BERLIN, Germany (AFP) — Nicaragua’s plans for an Atlantic-Pacific canal to rival Panama’s are a non-starter despite Chinese backing, Panamanian President Juan Carlos Varela said on Tuesday.

“A new canal, in Nicaragua for example, would not be economically viable,” Varela told reporters at a joint press conference with German Chancellor Angela Merkel in Berlin.

“Of course Nicaragua has the right to build a canal, the Chinese businessmen who’ve shown interest of course have the right as well, but we think it’s more speculation than reality.”

“We see (our canal) as a model of success, and we don’t see any risk from the possible construction of another canal in the region,” said Varela, adding there had been no progress on the Nicaraguan canal since ground was broken in late 2014.

He insisted the US$50-billion project could not hope to compete with Panama’s own century-old canal, recently widened to allow passage to increasingly broad container ships.

Inaugurated in its new, widened form last June, the volume of cargo passing through the Panama canal is expected to double to 300 million tonnes annually and sales to triple to US$1 billion in the coming 10 years.

The US and China are the biggest customers of the waterway, which accommodates around 5.0 per cent of global maritime trade each year.

Nicaragua granted a 50-year concession in 2013 to Hong Kong-based HKND to build and operate a canal three times the length of its Panamanian rival.

Work began in December 2014, but the Chinese firm said digging out and construction of the locks would not begin until late 2016.

Merkel meanwhile praised Varela’s speedy response to leaks about Panama’s links to tax dodging that made global headlines earlier this year.

“Panama reacted very quickly. I can only encourage them to clear up these things from the past clearly and definitively,” said Merkel, adding both countries hoped to seal an agreement on financial transparency and information exchange by yearend.

In April, the International Consortium of Investigative Journalists published stories based on millions of documents from the computer archive of Panamanian law firm Mossack Fonseca.

The files unmasked politicians, celebrities and wealthy individuals around the world who used the firm’s services to create offshore entities and hide assets.

While not all of the activities revealed were illegal, the Panama Papers drew attention to rampant tax avoidance and money laundering.

“We in Panama want to play a leading role and close these gaps,” Varela said, adding his government had spent more than two years updating its laws on financial transparency to tackle tax avoidance, terrorism, the drug trade and insecurity.