South America’s ‘made in China’ super port prepares for a trade transformation

Ahead of the ribbon-cutting ceremony for the Port of Chancay – a Chinese-built megaport on Peru’s Pacific coast, set to transform regional trade – China-made ZPMC unmanned cranes line up on the harbor.

BYD pickup trucks are ready to shuttle engineers around, while Huawei’s 5G internet towers have been newly built to handle automated operations.

“Everything is on point,” said Mario de las Casas, port public relations manager for Cosco Shipping, the Chinese state-owned shipping giant that will operate Chancay when the port opens on Thursday. Made in China”. “This is a great opportunity not only for Peru but for the whole region,” he added as Peruvian and Chinese flags fluttered above street lights.

Peruvian officials say the port built by Cosco with local mining company Volcan will be transformative Peru — a major producer of copper and fruit — into Singapore in South America, and will boost maritime trade along the continent’s Pacific coast as it can accommodate larger ships in deep waters .

However, analysts and officials have raised concerns that the $3.6 billion project, which follows a series of other Chinese infrastructure investments, in fact represents a concession. Peru’s sovereignty over the port.

The United States, for which China’s growing influence in Latin America is a strategic issue, has warned the port could be used by Chinese warships. And this development could create an area of ​​controversy for US President-elect Donald Trump as he implements a policy tougher line with China.

“The risk to Peru is on many levels,” said Evan Ellis, a professor of Latin American studies at the U.S. Army War College. “The number one risk is that the country does not reap the benefits of its abundant resources and geographical location, but instead the Chinese receive those benefits.”

Chinese President Xi Jinping, arriving in Peru this week to attend the APEC summit before a state visit, will appear with Peruvian President Dina Boluarte at Chancay’s inauguration on Thursday via video link from Lima, 80km away. US President Joe Biden will also be at the APEC summit on his first and last visit to South America as president – with little information given.

In May, between a Dispute with CoscoPeruvian lawmakers passed a law granting them exclusive rights to operate Chancay, which Ellis said was “previously unthinkable and goes against the grain of Peru’s assertion of sovereignty over its ports.” You are a window to the world.”

Peruvian Transport Minister Raúl Pérez-Reyes dismissed those concerns, saying Chancay would be monitored by Peruvian customs and port authorities.

“In this case, it’s an investment with Chinese capital, but it’s exactly the same as British or North American capital. . . in no case has our sovereignty been lost,” Pérez-Reyes said.

He said the port will allow Peru’s booming agricultural sector to continue to grow. “What Chancay will do is redirect some of the cargo and send it straight to Asia.”

Cosco said that of the $3.6 billion construction cost, $1.3 billion was invested in the first phase. The deep-water port can berth some of the world’s largest shipping vessels, with a capacity of 22,000 20-foot equivalent units, or TEUs, an industry standard for containers. No other port on the Pacific coast of South America can handle ships of this size.

Chancay will shave at least 10 days off the previous 35-day trip from Peru to China, meaning ships will no longer have to stop at the Mexican port of Manzanilla or California’s Long Beach.

Brazilian goods, which sometimes travel east to Asia or through the Panama Canal, will also save at least 10 days of travel time, Cosco said.

A land transport law passed in May will allow goods to move between Peruvian ports before arriving, saving time on the road. Cosco said small ships from Ecuador, Chile and Colombia will be able to transport goods to other Peruvian ports. These goods would then be shipped to and exported from Chancay.

Pérez-Reyes said Brazil would also benefit from using the Southern Interoceanic Highway, which passes through Brazil’s agricultural hubs of Acre and Rondônia before reaching Peru’s Pacific coast.

Chancay, part of Beijing’s Belt and Road Initiative, adds to a Chinese portfolio that includes Peru’s largest copper mine, Las Bambas, owned by MMG, a mining company. Chinese waterfall.

In April 2023, China Southern Power Grid acquired Enel’s Peruvian power business, which supplies electricity to the northern region of Lima, the country’s capital. Lima’s remaining power was sold in 2020 to China’s Three Gorges Group, which also owns a Peruvian hydroelectric dam.

Peru in March awarded the rights to build and operate a port in the south to a subsidiary of Chinese company Jinzhao, which operates an iron ore mine near Ica.

In contrast, Peruvian Trade Minister Úrsula León said the US is missing out on investment opportunities. Beijing and Washington both have free trade agreements with Lima, with Beijing expected to strengthen the FTA during Xi’s visit.

China is Peru’s largest trading partner, with copper, iron and fishmeal accounting for the majority of exports totaling $23.1 billion in 2023. Exports to the US amounted to $9.1 billion .

“There are some opportunities [the US] is missing, so it’s important that they know a little more about our market,” León said.

León said the US “also has opportunities” to invest in major projects, including the planned Corío port in the south. “So we cannot generalize and say that Peru is in fact becoming dependent on China,” she said.

The US State Department said the US discussed Chancay with Peru and raised “the importance of oversight, security, adequate regulation and fair competition for all infrastructure projects.” important”.

“We are not asking our partners to choose between the United States and the United States [China]But we are demonstrating the benefits of partnership” with the United States, the official said.

China is currently South America’s largest trading partner and a major investor in important energy, transport and mineral projects. Beijing insists its overseas projects are aimed at mutual benefit, an approach at odds with what it calls Washington’s pursuit of hegemony and geopolitical advantage.

Chancay will initially be able to handle between 1 million and 1.5 million TEUs per year, as well as 6 million tons of bulk cargo, before increasing to 3.5 million TEUs per year. The Port of Callao, Peru’s main port, was expanded this year and has an annual capacity of 3.7 million TEUs, the Ministry of Transport said.

But Latin America’s port capacity lags far behind Asia, North America and Europe, which have many ports with throughput of more than 10 million TEUs each.

To avoid congestion in the town of Chancay – until recently a sleepy fishing community visited by tourists on weekends – Cosco built a 1,830-meter tunnel, Peru’s longest, for trucks go around town. Residents have complained about noise from the port and what they say is a threat to fish stocks and wetlands.

Cosco plans to build a business park next to the port, where China’s largest electric vehicle maker BYD has expressed interest in opening an assembly plant.

Lawmakers are considering granting exclusive tax breaks to these facilities, although that has faced opposition over the advantage it gives Chancay over Callao, the state-owned port but is privately run 73 km away.

“Investing in Chancay is attractive enough without having to introduce tax breaks,” said Adriana Tudela, an opposition congresswoman. “In essence, we are creating a huge disadvantage for other ports.”

Before leaving the position of Commander of the US Southern Command, in charge of Latin America and the Caribbean, General Laura Richardson warned that Chancay could be used by the Chinese navy. “This is a book we have seen elsewhere,” Richardson speak.

Alfredo Thorne, a former finance minister who runs an economic consulting firm, said that while Chinese investments benefit Peru’s exports, “they bring political risks large, including access to the US market.

Thorne said US President-elect Trump could drag Peru into any dispute with Beijing, as he is expected to pursue protectionist policies and take a hard line against China. Trump has proposed a 60% tariff on Chinese goods.

“I don’t see what China’s interest is in continuing to bet on Peru as it confronts Trump,” Thorne said.

Additional reporting by Michael Stott in London