Peru is pitching a new port project to American investors as it tries to counterbalance China’s increasing influence in the South American country through expanding infrastructure projects. Amid continued efforts by the Chinese Communist Party (CCP) to penetrate through infrastructure projects, Peru is actively promoting a new port project to American investors to counteract Beijing’s growing influence in the country through maritime trade.
China’s Cosco Shipping, a major player in the shipping industry, is set to inaugurate the Chancay Port in Peru later this year. This port could significantly boost Beijing’s influence in South America through expanded maritime trade, but it has also raised concerns about U.S. security. With geopolitical considerations in mind, Peruvian officials are using the example of the Chancay Port to invite American investment in their resource-rich “backyard.”
“This will be a port that can counterbalance China’s Chancay project,” said Alfredo Ferrero, Peru’s Ambassador to the United States, during an interview with Bloomberg in New York following a speech to executives.
Costing $3.5 billion and funded by loans from the Bank of China, the Chancay Port is located about 50 miles north of the Peruvian capital, Lima, with a depth of nearly 60 feet, making it the first port on the Pacific coast of South America capable of accommodating large vessels. This infrastructure will allow companies to directly transport goods between Peru and China using these large ships, bypassing the need for smaller vessels to detour through Mexico or California.
Given the strategic importance of the Chancay deepwater port to Beijing, it is expected that Chinese President Xi Jinping will unveil the port during the Asia-Pacific Economic Cooperation (APEC) summit in Peru in November. This will mark his first visit to South America since the COVID-19 pandemic.
However, the Chancay Port project has raised concerns among American officials, who have openly criticized Chinese investments in Latin America surpassing those of U.S. companies. While the Chancay Port has garnered attention, it is just the latest example of Chinese investment in Peru.
“Beijing owns 100% of Lima’s power and many copper mining projects are also Chinese-owned. China will have the largest port in South America,” said Ferrero. “Objectively, that’s the situation, and the U.S. has also taken note of it. But merely noting it isn’t enough; action must be taken.”
Ferrero, a former Peruvian Minister of Trade who negotiated a longstanding free trade agreement with the United States, was appointed as the Ambassador to the U.S. earlier this year and has been working to attract new investments.
He has proposed a new port project named “Corio,” located about 700 miles south of Chancay. Corio is situated south of Callao and is in close proximity to the Matarani Port, a crucial hub for copper exports. Although the concept for the Corio port is in the early stages, Ferrero believes the project holds potential as countries like Chile, Argentina, and Bolivia ramp up lithium production due to increasing demand for electric vehicles.
Ferrero is actively raising awareness among potential private investors in the U.S. about the Corio port project, stating, “Our idea is that the U.S. government is calling on potential interested parties to invest.”
According to the Wall Street Journal, as China’s cheap manufactured goods flood markets worldwide, concerns have been raised about the impact. The Chancay Port in a small town on Peru’s Pacific coast in South America could open up new markets for Chinese electric cars and other export products. China is already the largest trade partner for most regions in South America.
Peru ranks as the fifth country most affected by Chinese influence globally, according to metrics by Doublethink Lab and China in the World Network. Chinese-made vehicles are ubiquitous in Peru.
The U.S. is apprehensive that China’s control over Peru, which has the potential to become the first truly global business hub in South America, could further strengthen Beijing’s grip on regional resources, deepen its influence in neighboring countries near the U.S., and ultimately lead to military deployments in the vicinity.
Brazil, the largest economy in Latin America, declined U.S. requests to exclude Huawei from its 5G networks and instead seeks to develop semiconductors jointly with China. Chinese companies are constructing a metro system in Bogota, the capital of Colombia. Honduras severed ties with Taiwan in hopes of receiving significant investments from Beijing. In Argentina, China is acquiring lithium mines, a crucial component for electric vehicles.
Former U.S. officials state that the Chancay Port project highlights a diplomatic void left by the U.S. in Latin America as it focuses resources elsewhere, particularly in Ukraine and the Middle East.
Peruvian Minister of Foreign Affairs Javier González-Olaechea remarked that if the U.S. is concerned about China’s growing influence in Peru, it should increase its investment efforts, stating, “Everyone is welcome” to invest.
“The U.S. has taken many actions almost everywhere but not so much in Latin America,” González-Olaechea told Hua Ri, “It’s like a very important friend, but rarely seen together.”
Peru welcomes Chinese investments in various sectors from ports to copper mining and electricity, which has essentially put Chinese companies in control of most power distribution in Lima.
Leland Lazarus, a specialist in Latin American relations at Florida International University, mentioned that Peru is further increasing its economic reliance on China, making it vulnerable to potential economic threats from Beijing.
The Council on Foreign Relations (CFR) noted that the Chancay Port has military potential and Chinese entities hold a 60% stake in it.
Cosco states that the Chancay Port is purely for promoting commercial development. Shortly after the port received approval in 2019, Chinese state media extensively touted Peru as a future hub for China’s trade with South America, aiding Beijing in addressing other priorities like undersea cable connections.
The construction of the Chancay Port is a continuation of the 2016 port establishment by Cosco Group in Greece, which solidified China’s presence in Southern Europe. Presently, Chinese companies control or operate roughly 100 foreign port terminals. Chinese naval vessels have docked at over one-third of these ports.
The repercussions of Chinese-owned ports have become increasingly evident, with Mozambique burdened by debt, Kenya facing environmental degradation, and signs in Europe hinting that local interests are secondary to those of China.
The construction of the Chancay Port has brought significant noise and vibrations to the once peaceful fishing community. Locals report cracked walls, damaged roads, and a decline in the fishing industry in the area. Cosco Group claims to have repaired houses and roads, and is actively working to minimize the impact on fishermen.
A former U.S. official with knowledge of the negotiations and a former Peruvian official informed Hua Ri that the U.S. has discussed concerns with Peruvian officials regarding Chinese control over critical infrastructure like the Chancay Port. The U.S. is worried about the interplay between Chinese commercial companies and the government, especially the military. Ports and related equipment can have dual commercial and military purposes.
John Youle, an American operating companies in Peru, stated, “Americans have been a bit asleep. Suddenly they woke up.”