“Due to its potential size and volume of operations, Peru’s Chancay mega-port is destined to become a nerve centre of international trade.” And it will be exclusively controlled by Cosco.
Peru appears to be on the verge of becoming a major global shipping hub, and all thanks to a largely Chinese financed infrastructure project. Over the past five years, the Chinese giant Cosco Shipping Ports has, together with Peruvian mining company Volcan, invested $3.6 billion in transforming a natural deep-water port in Chancay, just 45 miles north of Lima, into a cargo mega-port. The first part of the project, now in its final phase, is slated for inauguration in November when Chinese leader Xi Jinping is scheduled to attend the APEC summit in Peru.
Once the work is finished, Chancay will become South America’s largest deep sea port, boasting two massive terminals. There will be a new container terminal with 11 berths as well as a new four-berth terminal for bulk cargo, general cargo, and rolling cargo, World Cargo News reported.
“We are very focused on the operation,” said Alonso Guinand, commercial manager of Cosco Shipping, in a recent interview with a local Lima television station. “The plan is to inaugurate in November and begin receiving vessels between January, February March next year.”
From Chancay to Shanghai
Commissioned in 2019 (though preliminary work began in 2016), the Chancay megaport is seen as the first of its kind in Latin America: a large-scale Pacific-coast logistics centre serving Asia that could save valuable shipping time by reducing the need to transit either the Panama Canal or Cape Horn. But that is likely to be a long time coming, if it ever transpires. It will also be the first port on South America’s Pacific coast that is able to receive ultra-large vessels – which can transport more than 18,000 containers — because of its nearly 60-foot depth.
The potential impact for trade between South America and East Asia is likely to be significant, reported BBC Mundo in 2023 (translation my own):
The megaport will be one of the main departure points for the raw materials that the region exports to China, such as copper and other minerals that Peru produces in abundance. Due to its size and volume of operations, it is destined to become a nerve centre of international trade.
“The dimensions are so significant that it appears that Chancay is going to become a critical point for shipments to China and all of Asia,” Margaret Myers, an expert on Asia and Latin America at The Dialogue, a think tank, told BBC Mundo.
Through the enormous investment — US$3.6 billion according to official projections — and complex engineering work… the Peruvian government hopes to attract around 50% of the nearly US$580 billion in trade that moves annually between China and South America.
Given the projected shorter shipping times, Chancay is of particular interest to local producurs of agricultural and fishing perishables. According to the Foreign Trade Research and Development Institute of Lima’s Chamber of Commerce, or Idexcam, most of the export value (63%) shipped from Chancay will consist of perishable fishing products (traditional and non-traditional) and non-traditional agricultural products. The port, it says, will not export or import minerals, but will instead transport mainly goods in containers, such as agro-industrial products, toys, packaged products, automobiles, equipment and machinery, among others.
Hopes are high, however, that Chancay will be used to export products from neighbouring countries like Ecuador, which recently signed an FTA with Beijing; Chile, which also has an FTA with China; Colombia, and perhaps even Brazil. Much will depend on whether the road links between Peru and Brazil — particularly the Andean sections — can be improved. Brazilian companies and government ministers are certainly showing an interest in the project. The port will also function as a gateway to South America for imported Chinese manufactured goods, including mobile phones, computers and electric cars.
Not everyone is excited at this prospect. The European Council on Foreign Relations warns that both the US and the EU risk falling behind China in Latin America as they struggle to compete with China’s vertical investment strategy in the region. The US, in time-honoured fashion, is exerting political pressure behind the scenes. According to one report, Washington’s soft-power arm USAID is playing a part in the US’ counter-offensive against China in Peru by investigating “foreign agents” in the country, with a particular focus on “unethical” practices by “Asian” (read: Chinese) multinationals.
China is already Peru’s largest trade partner on both the exports and imports side. A whopping 35% of Peru’s exports go to China, compared with 19% to the US. Peru is the second largest destination for Chinese investment in Latin America, behind only Brazil. It is also one of just five countries in the region, along with Chile, Costa Rica, Nicaragua and Ecuador, that have free trade agreements (FTAs) with China, though another five, including Colombia, Panama and Uruguay, are in the process of negotiating FTAs with the Asian giant.
As noted in previous pieces (including most recently here), China has made huge incursions into the US’ so-called “back yard” over the past two decades, as both a trading partner and investor. It is already South America’s largest trade partner, having increased its volume of trade with the region more than 25-fold between 2000 and 2020. The US continues to hold sway over Central America and, pound for pound, is still Latin America and the Caribbean’s largest trading partner. But that is predominantly due to its huge trade flows with Mexico, which account for well over half of all US-LatAm trade.
Chancay will allow Beijing to further strengthen its grip over South America’s resources, warns the Wall Street Journal. There are also concerns that the port could be converted for military use as well as over how data passing through the massive operation could be used by the Chinese Communist Party.
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Nick Corbishley 