Nicaragua’s former revolutionary leaders have led a campaign of harassment and persecution against communities opposing the construction of a controversial canal that threatens the homes and livelihoods of tens of thousands of people, according to Amnesty International.

Plans to construct a $50bn shipping canal 175 miles long and 500 yards wide have provoked a mix of anger, fear and defiance not witnessed since the civil war between the Sandinista government and US-backed Contra rebels ended in 1988.

Critics say legislation to enable the project was expedited without legitimate consultation, environmental studies or political debate.

The murky legal framework which led to the canal concession violates a catalogue of national and international human rights standards, according to Amnesty’s new report. Nicaragua’s constitution was rewritten in an attempt to put the concession beyond legal challenge.

President Daniel Ortega, a former Sandinista leader, has been accused of surrendering Nicaraguan sovereignty as the 100-year canal concession grants Chinese telecommunications magnate Wang Jing and his Hong Kong Nicaragua Canal Development Investment (HKND) control over large parts of the country. The 2013 canal law also green-lighted environmentally harmful infrastructure projects including ports, free trade zones and a railroad.

Ortega, 71, has described the canal as “phase two” of the Nicaraguan revolution, dismissing critics as anti-revolutionary and anti-development. Nicaragua is one of the poorest countries in the western hemisphere.

Bianca Jagger, the Nicaraguan human rights activist, told the Guardian: “Daniel Ortega seems determined to go ahead with a nefarious mega-project … [but] the canal is not financially viable, it is an insane project that would cause harm to the people of Nicaragua, irreparable damage to our water sources, to our rainforests, to our environment. If allowed to go ahead, it will be an environmental crime.

“The legal framework benefits only the interests of the concession holder and investors at the expense of the community’s human rights.”

If built as billed, the canal would bisect Lake Nicaragua – Central America’s largest lake – and forcibly displace an estimated 120,000 people, including Rama and Creole communities from protected indigenous territories on the Caribbean coast.

It would be the world’s biggest civil engineering and construction project, dwarfing the Panama canal, and would navigate the country’s most important fresh water reserve and destroy protected natural spaces home to 22 endangered species.

Some communities living in the affected areas found out about the canal when, without warning, foreigners turned up escorted by police and military patrols to measure their lands, according to Amnesty. The law authorizes HKND to expropriate whatever land it wants, while denying displaced families the right to appeal.

Despite the pushback, the government has refused to enter into meaningful dialogue with communities, and details on relocation and compensation remains scant.

Instead, the report says police have used excessive force, violence and unlawful detentions against peaceful protesters who include former Sandinista fighters once loyal to Ortega.

One peasant farmer told Amnesty: “I tell my children goodbye because I don’t know if I’m going to make it back.”

Local human rights and environmental groups have also suffered a wave of harassment and intimidation in retaliation to their efforts to investigate and derail the project.

“The fact [that] authorities passed this game-changer piece of legislation under the table is shocking and utterly unacceptable. The Ortega administration is meant to be protecting its people from powerful economic interests, not the other way around,” said Erika Guevara-Rosas, Amnesty’s Americas director.