President Daniel Ortega and Chinese businessman Wang Jing have signed an agreement giving his company the right to build a shipping channel across Nicaragua that would compete with the Panama Canal.
The signing took place a day after Nicaragua's National Assembly voted to grant Hong Kong-based HK Nicaragua Canal Development Investment a 50-year concession to study, then possibly build and run, the canal.
Mr Ortega's backers say the project would transform one of the region's poorest countries by bringing tens of thousands of jobs to the country and fuelling an economic boom that would mimic the prosperity of nearby Panama and its US-built canal.
Critics say the proposal, which was given fast-track approval, contains no specific route for the canal and virtually no details of its financing or economic viability.
Addressing opposition comments that the previously little-known Chinese businessman was illusionary, Mr Ortega said at the signing: "Here we have our brother Wang Jing in flesh and blood, here is the ghost in flesh and blood."