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Executives from the Panama Canal are apparently preparing for the very real possibility that Nicaragua will build a rival canal.

“We take the possibility of construction of a canal in Nicaragua very seriously,” Francisco Miguez, executive vice president for finance and administration of the Panama Canal Authority, recently told the Christian Science Monitor.

Mr. Miguez also made it clear that the technical resources exist to build the 173-mile canal, which is funded by a Chinese billionaire.

Like many Central America observers, I laughed when this project was floated two years ago. There has been talk of building a canal through Nicaragua for 100 years. It never made sense and there didn’t seem to be any reason to believe it would happen.

But it is clearly moving forward, thanks to the support of billionaire Wang Jing, one of China’s richest men. The cost to build the canal is estimated at somewhere more than $40 billion, which has apparently not stopped progress. Recent news articles say specific planning is underway, with money flowing to consultants and construction teams.

Of course, that doesn’t mean it will happen. Environmentalists say the Nicaragua canal would be a disaster. Plans for the canal to pass through Lake Cocibolca, a key freshwater reservoir for the region and one of the largest tropical freshwater lakes in the Americas. The lake is also home to some of the region’s most fragile ecosystems.

At the same time, there is widespread agreement that the canal doesn’t make economic sense. Backers argue that the canal will be able to handle the next generation of super-ships, which would be even bigger than the current Panamax fleet. But there’s no guarantee these mega-ships will materialize and there is limited growth expected in the container fleet over the next 10 years.

“A large number of experts… agree on one thing: There’s not enough demand to justify a second canal so close to the Panama Canal,” CNBC reported last month.

But the plan will have supporters. Shipping companies may like the idea – a competing canal might help keep rates down. And that might also explain why the China government may be silently behind the plan to build the Nicaragua canal, which would give it a trade route free from U.S. control. As several observers have noted, the Chinese government won’t be deterred by financial obstacles, if they decide to make the canal happen.

Meanwhile, the Panama Canal is moving forward with its $6 billion expansion, due to complete in about a year, which will re-enforce its role as the main trade corridor between east and west.

Inside the Panama Canal expansion:

Duncan McGowan is president of Punta Pacifica Realty, a Panama real estate agency focused on Punta Pacifica, the exclusive neighborhood of 18 towers perched on the edge of the Pacific Ocean.