Peru's New Chinese Megaport Reveals a Refined Belt and Road

 

[By Selwyn Parker]

China should be extremely grateful to the Peruvian government of Dina Boluarte. Courtesy of her Congress, which rewrote the rules of foreign ownership to make it happen after a long dispute with the country’s ports authority, China’s state-owned Cosco shipping giant has wrapped up exclusive use of Peru’s brand-new Chancay deep-water megaport for up to 60 years.

Numerous other benefits come with the deal. For a relatively small investment of about US$1.6 billion – its share of the total $3.6 billion cost – Cosco has a 60 per cent stake. China also gets an important new connection between China and Latin America in the form of two new container shipping routes.

Simultaneously, the logistics costs of China’s exports into the region will fall significantly, and the revenues of the operator, Cosco Ports, will increase. There will also be further opportunities for Chinese connections in the region, as President Xi Jinping made a point of mentioning when he officially opened the port in mid-November.

Once again, China’s Belt and Road strategy has beaten the United States to the punch. Located 80 kilometres from the capital Lima, the port symbolises America’s continuing and costly neglect of Latin America. It says much that Peru, a nation of 38 million, already has a substantially bigger trade with China ($36 billion) than it does with the United States ($21 billion) when it should, of course, be the other way around.

American neglect

Outgoing President Joe Biden’s state visits to Peru and Brazil in November are only his second to South America during his entire term. As the Atlantic Council points out: “At both stops he will seek to regain US momentum but without much to offer following Democratic Party losses last week.” Donald Trump made just one visit to this region of 33 countries in his last term and that was to Argentina.

Meantime, the port is a classic Belt and Road operation that takes more than it gives. While it promises to boost Peru’s exports into the Pacific, deliver $4.5 billion a year in revenues, and create 8,000 jobs, its construction was mired in controversy. Peru’s Ojo Público news outlet notes that Cosco and Volcan, a local mining group that shared construction, were able to seize a large maritime area that was supposed to be earmarked for defence, start work without any environmental studies (landslides during construction of a 1.8-kilometre-long tunnel buried homes), and bought up publicly owned land at less than a dollar a square metre. Compensation claims of local protest groups “were met with indifference and harassment”.

Senior US military are also concerned. Last year, General Laura Richardson of the US Southern Command warned that China is “on the 20-yard line of our homeland”, citing Chancay’s potential to be a dual-use facility, accommodating military vessels. If that were to happen, Cosco Ports would be in the middle.

“If a conflict were to break out in, for example, Taiwan or the South China Sea, this global network of 38 Cosco-operated ports could pose a serious logistical challenge for foreign militaries looking to move ships or supplies to the Indo-Pacific”, warns the Atlantic Council.

And it’s now 39 ports. In October, Cosco bought a substantial stake in Thailand’s largest container port, Laem Chabang, for US$110 million, according to its website. Extremely profitable according to its latest accounts, Cosco claims a 28 per cent profit on a fast-growing income, about a quarter from its overseas ports. As of late 2024, Cosco was building and/or operating ports in strategic waterways from the Aegean Sea to the Panama Canal.

The Atlantic Council believes it’s high time Western countries stepped in with their own capital projects in order to “counter malign Chinese (and Russian) influence in Latin America and the Caribbean”. These should be “attractive and affordable alternatives for regional economic development” that would be based on investment in projects that would serve as alternatives to Beijing-backed initiatives. The problem may be that Western-style capitalism cannot compete with China’s state-managed version. For instance, no American firm bid for the major expansion of Colombia’s Bogota metro, while three Chinese firms did.

Meantime, as the Lowy Institute’s latest Pacific Aid Map shows, China is refining its Belt and Road strategy in the Pacific through “a resurgence in new project commitments [that] signal a revival in Beijing’s engagement with the region”. In concrete terms, China is targeting specific countries with big-ticket grants rather than loans while handing out “high-frequency smaller grants administered through its embassies”. The Solomon Islands’ Constituency Development Fund has, for example, banked “a large-scale direct budget transfer” from Beijing, while Kiribati’s Social Stability Fund is a recipient of a substantial transfer, also courtesy of Beijing. As the Institute explains, each of those loans is “characterised by weak accountability mechanisms”. (No reference to these grants can be found on either country’s official government sites.)

Death knell

Peru’s new port may mark the death knell of another epic project – a gigantic, 125-kilometer-long canal through Nicaragua that would rival the Panama Canal. Originally mooted more than a century ago, it was revived in 2013 by a shadowy Chinese company called HKND that committed to building the canal before 2020. “World trade has been so developed today that it needs a new canal,” said its promoter Mr Wang Jing. Progress went as far as a 50-year right issued by the Nicaraguan government, renewable for a further 50 years, but little has been heard since.

Meantime, Peru’s new port expands Chinese economic influence deep into the country and beyond. Very much designed for the future, it can handle a million containers, six million tons of bulk cargo and, in a big boost for China’s automotive sector, 160,000 vehicles. A 1.8-kilometer-long tunnel leads straight to the Pan-American Highway. Next up will be a regional distribution hub that will essentially warehouse Chinese-made goods destined for South America.

In short, an economic beachhead for China in Latin America to the cost of the United States.

Selwyn Parker is an author and journalist specialising in Asia-Pacific, European and Latin American issues. This article appears courtesy of The Lowy Interpreter and may be found in its original form here.