A sleepy, isolated island community in Nicaragua, nestled at the foot of one of Central America's most active volcanoes, faces an uncertain future. But the danger doesn’t come from the perpetual risk of geological disaster. The threat is manmade.

Over the past decade, tourism to Isla Ometepe has grown as word of its Eden-like natural beauty has spread. But this dual volcanic island in the middle of Lake Nicaragua, often dubbed a “mini-Amazon”, recently found itself at the centre of a controversial mega-engineering project: a Chinese-run, interoceanic canal that will be deeper and longer than Panama’s, ideal for giant cargo ships.

The proposed 278km route, connecting the Caribbean Sea and Pacific Ocean, will carve through Lake Nicaragua, potentially displacing the surrounding rainforest and threatening indigenous communities. The route will also bring the supertankers right past Ometepe’s Eden.

Work on the canal officially began in December 2014, sparking a wave of protests from those who are worried about losing their homes, and the damage the canal might cause to the environment. Doubts have also been raised over whether there will be enough funding to complete the canal within the allotted five-year plan.

The 267sqkm island, home to a population of just under 30,000, receives about 40,000 visitors a year. Between the rough ferry ride over and the island’s bone-shaking roads, it’s understandable that visitor numbers are still relatively low, even with the island’s incredible beauty.

On the day that I crossed Lake Nicaragua – Central America's largest body of freshwater, so vast that Spanish Conquistadors believed it was open sea – Isla Ometepe’s volcanoes were engulfed in a heavy cloud clover that burst as soon as I stepped onto the port. The lush vegetation beamed Day-Glo green against the remaining grey in the sky. Birds and butterflies scattered while villagers carried on with their days. Turns out, the only thing that moved fast here was the weather.

I was staying at Hacienda Mérida, a former farm/coffee-processing plant-turned-ecolodge located in Volcan Maderas National Park. Its owner, Alvaro Molina, was one of the first to bring tourism to the island when he opened the lodge in 2001.

A jetty from the lodge offered uninterrupted views of Conceptión, the 1,610m-tall, very active volcano that towered over Lake Nicaragua. Ometepe's extinct volcano, Maderas, with its jagged rainforest-covered peak, formed the lodge’s backdrop. Instead of trekking, swimming, kayaking, cycling and horse riding – all popular activities here – I chose a hammock with a view, and flopped.

The next morning, I set off early to kayak on Río Istiam, a river and swamp that cuts inland through the middle of the hourglass-shaped island. On the 3km paddle towards the river mouth, I passed villagers swimming and fishing in the lake. My guide, Maykel Carillo, said locals used to stay out of the water because it was once infested with bull sharks. By the 1980s, overfishing and a shark fin trade wiped-out the population, but some say a few still lurk under the surface. I dipped in my paddle with extra caution.

Lake Nicaragua will need to be dredged in order to build a canal that’s deep enough for giant cargo ships. “It will kill this lake,” Carillo said. “Many flora and fauna will die.” The local people, most of who are subsistence farmers and rely on fishing, do not have the skills required for the type of jobs the canal will create, Carillo added. “Some have never been to school, so there is no opportunity for them,” he said.

On the other hand, Nicaragua is one of the poorest countries in the world. Officials expect the canal to bring in an investment of more than one trillion cordoba, which would more than triple the size of the current economy.

As we entered the lagoon, the volume of birdsong dialled up a few notches. The wetland is home to an abundance of birdlife, and we spotted egrets, herons, jacanas and blue jays . A committee of vultures perched on gnarled tree branches jutting out of the tranquil water. Conceptión, and the cloud surrounding its peak, created a perfect reflection on the lake’s glass-like surface.

After an hour of paddling – we see a caiman! Or a log! No… it’s a log – we headed back, spotting a turtle, or maybe a rock, on the way.

Many travellers climb Ometepe's volcanoes, but weather conditions often turn the hike into a walk in the clouds. This was a convenient excuse for me to try a lighter 3km hike to the island’s 50m-high waterfall, San Ramón. As I set out on the rainforest path that runs up the side of Maderas, I spotted a group of howler monkeys, chattering among themselves as they swung through the branches. After an hour's scramble, I reached the thundering waterfall, its cold mist wonderfully refreshing after the drenching humidity of the jungle.

At sunset, the guests at Hacienda Mérida gathered on its jetty. Some paddled out in kayaks towards the sinking sun, which cast a soft, purple hue over the scorched earth of Conceptión’s facade.

Molina traced the horizon with his arm. “In about five years, huge ships could pass by here,” he told me.

There is a still a huge amount of community uncertainty around the proposals, Molina said. The canal could attract more tourists to see the spectacle, like in Panama, he added – especially now that Ometepe has a new airstrip.

Coupled with an influx of workers who will move to the island for canal jobs, Molina said he’s concerned about the sustainability of this population growth, especially since the island already struggles with waste disposal from the minimal tourism it currently gets. For the time being, he has devised his own solution; he’s collected disused plastic and turned it into building material, using it to construct a school next to the lodge where guests are able to volunteer.

Environmental groups such as Forests of the World have warned about the damage that the canal could wreak over this biosphere, leading to the destruction of habitat, pollution, introduction of invasive species and deterioration of drinking and irrigation water reserves. Molino said a potential upside could be the range of ecological studies carried out for the first time, bringing top biologists and entomologists to Ometepe to conduct research. “Huge amounts of data will be collected and hundreds of new species will be identified – a lot of biological information that was not known now will be.” The canal could also help prevent deforestation – a major problem in Nicaragua – if it succeeds in lifting people out of poverty. “But if the government doesn’t improve education in a dramatic way, then really, the canal will serve no purpose because most of those jobs will be set out for foreigners,” Molino said.

By my last day on the island, the cloud that had been enveloping Conceptión’s peak lifted, unveiling the volcano in its full magnitude. It had been five years since it last erupted, and against the clear blue sky it was possible to see the dents and scars on the almost-red facade.

On the way to the ferry port, I stopped off at a spit that juts out into lake. The black sand, just visible, looked like the back of a whale emerging from the water. I walked to the end, ankles just below the water, and was able to see the famous image of the island, described by Mark Twain in his book Travels with Mr Brown: “Two magnificent pyramids, clad in the softest and richest green, all flecked with shadow and sunshine, whose summits pierce the billowy clouds.”

But 149 years after Twain visited, with such uncertainty over the future of the island, I wondered if the author’s observation about Ometepe – “so isolated from the world and its turmoil” – would remain as enduring as the image before me did now.