The Port Terminal of Chancay: A new jewel in the Chinese crown in South America.

The Multipurpose Port Terminal of Chancay is not just another in a series of Chinese investments in Peru. It is a strategic facility that will mark a before and after in international trade on the East Pacific coast with the fastest-growing region in the 21st century. In the north, the United States is beginning to invoke the Monroe Doctrine once again, but it is already too late. On November 17, the President of the People's Republic of China, Xi Jinping, and the President of Peru, Dina Boluarte, will inaugurate the Multipurpose Port Terminal of Chancay. For Peru, it will undoubtedly be the most important event of the last decade. And for the rest of Latin America, especially for the countries looking towards the Pacific, it will be the beginning of an intense period of commercial exchange with the fastest-growing economic region. The new maritime terminal confirms the end of globalization and anticipates changes in international relations. The "compartmentalized globalization," as some nostalgics prefer to call it, is creating new areas of greater internal integration but less integrated with the rest of the world. An era of economic fragmentation and regionalism is beginning, attempting to establish more resilient supply chains. Concern for information integrity promotes technological disconnection, and competition among economic blocs intensifies geopolitical tensions. One of these compartments is between China and other countries in Southeast Asia, in the western end of the Pacific Ocean, and Latin America, in the eastern end. It is led by the People's Republic of China, which produces one-third of the manufactured goods on the planet. In 2018, the Andean Development Corporation (CAF) estimated that around USD 55 billion in port investments were needed on the South American coast of this region. The initiative has been taken by the Asian giant, which moves 95% of its exports by sea, making it imperative for them to keep these channels open. By September 2023, they were present in 101 terminals worldwide, and on this Pacific coast, they manage the ports of Veracruz and Tuxpan (Mexico), a part of Balboa (Panama), Posorja (Ecuador), and San Antonio (Chile). Chancay will join this logistics network in a few days. Chancay joins a Chinese port network in the Western Pacific, which includes Veracruz and Tuxpan (Mexico), a part of Balboa (Panama), Posorja (Ecuador), and San Antonio (Chile). From a fishing village to an international mega port President Boluarte visited Shenzhen, Beijing, and Shanghai last June. She signed a Joint Action Plan 2024-2029 with Xi Jinping that, according to Foreign Minister Gonzalez Olaechea, "covers practically everything" (from commercial issues to space development). It was even considered to install a BYD plant, the world's largest electric car manufacturer, and to build railways for high-speed trains between Tacna, Lima, and Tumbes. Boluarte confirmed Xi Jinping's participation in the leaders' summit of the Asia-Pacific Economic Cooperation (APEC) Forum on November 15-16 in Lima, and a state visit on November 17 to inaugurate the port terminal in Chancay. Until recently, Chancay was a town of fewer than 64,000 inhabitants, located 78 km north of Lima, a quiet fishing and agricultural enclave. But it will soon become a crucial point for shipments to China and all of Asia. According to Margaret Myers, an expert at The Dialogue, an American think tank, Chancay is an example of how China secures, end to end, the supply chains that fuel its economic growth. With great optimism, Boluarte's presidential cabinet officials hope that this terminal will attract at least half of the USD 480 billion exchanged annually between China and Latin America. Outside the government, expectations are less positive. Santiago Roca, a researcher at the Centrum Graduate School of Business at the Pontifical Catholic University of Peru, and Juan de Dios Guevara, founding director of the Peru-Brazil Chamber of Commerce, warn that while Peru will benefit, "there is no doubt that China, Asian countries, and Brazil will also penetrate the Peruvian market, significantly affecting national production." Roca and Guevara wonder if anyone believes that the benefits of this infrastructure will automatically appear, "by the magic of the free market and free trade," referring to the lack of plans to take advantage of the positive externalities of Chancay, define the best route for the railway that would connect the new terminal to Brazil, mitigate environmental impacts, among other aspects. In a skeptical tone, they point out that Peru still does not know what to expect from this mega port and the "bioceanic train," and recall that in the 19th century, "we lost the guano and the trains." From Peru or from China? Gabriela Pajuelo, from the University of Navarra, states that in Chancay, the "first port of China in Latin America" is about to be inaugurated, with a two-year delay. It is a consequence of the increasing presence of the Asian giant on the southeast margin of the Pacific and the FTA negotiated with Peru in 2009. In fact, since 2014, China has occupied the place that the United States previously held as Peru's main trading partner. Chancay will be a logistical hub to redistribute cargo to Colombia, Ecuador, Chile, and Peru, and the gateway for the giant Asian's manufactured goods in this region. There is also interest on the other side of the Andes. A delegation from the Brazilian states of Acre, Rondonia, and Amazonas, which export around USD 30 billion annually to China, visited Chancay last June. The 45 days it takes for their products (especially soybeans) to reach their destination could be reduced by up to 30% if a railway is built from that region to the mega port. The Chinese state-owned company Cosco Shipping Ports plans to invest USD 1.2 billion in the first phase of this project through the company Terminales Portuarios Chancay. By 2030, the investment will reach USD 3 billion. The port will have a depth of 16 meters to accommodate post-Panamax vessels. It will feature an entrance complex, a viaduct tunnel, a port area with an operational surface that will include a terminal with two docks capable of handling one million containers a year, and another terminal for bulk cargo, general cargo, and rolling cargo with two additional docks capable of handling six million tons a year, among other services. Cosco Shipping Ports transports 40% of global cargo, managing 297 terminals in 37 ports in mainland China, Southeast Asia, the Middle East, Europe, South America, the United States, and the Mediterranean. Chancay will be the first one it fully controls in the Western Hemisphere. In January 2019, it acquired a 60% stake for USD 225 million in Terminales Portuarios Chancay, a subsidiary of Volcan Compañía Minera, one of the world's largest zinc producers. For Cosco, this operation meant taking full control of the project. In mid-2023, Volcan's board approved the spin-off of the port division, and 40% of its stake in the Chancay project became managed by a new company. It is estimated that the Multipurpose Port Terminal of Chancay will have an initial throughput of one million TEUs and six million tons of general cargo per year. In its third phase, by 2030, it will reach three million TEUs per year and 20 million tons. It will be the most important port in South America and will compete advantageously against the largest maritime terminals in Latin America on the Pacific. The Peruvian government promotes Chancay as if it were a gold mine. But it has not mentioned the competition from the Callao Port Terminal, which recorded a throughput of 2.7 million TEUs in 2023, more than 50% of the current national total. Undoubtedly, shipping companies will reconfigure their routes, and Peruvian agro-exportation will gain competitiveness, as will Ecuadorian and Chilean exports. But the control of the port will be in the hands of the Chinese shipping company. Chancay is not a concession; it is a private investment, on which Cosco Shipping has exclusivity, ratified by the Congress of the Republic through an ad-hoc law that allows the holder of a private port for public use with port clearance to provide exclusive port services. In just over five years, the Chinese government, through its shipping companies, will become the largest port operator on the eastern shore of the Pacific, considering the throughput of Chancay along with its participation in the ports of Veracruz and Tuxpan, Balboa, Posorja, and San Antonio. A territory in dispute The head of the United States Southern Command, General Laura Richardson, visited Argentina and Chile in April 2023. She stopped in Punta Arenas, where she chaired an informative session. This old port halfway between the Atlantic and the Pacific, in the Strait of Magellan, has regained the strategic importance it had over a century ago, due to the drought affecting the Panama Canal. In a conference at Florida International University on May 9, Richardson raised the need for companies to compete for contracts to promote U.S. investments and presence in strategic projects, warning that Chinese investments in mega ports provide unprecedented access to Latin American natural resources for Beijing. U.S. distrust of the geopolitical implications of these investments contrasts with the majority of Latin American governments and analysts labeling them as "South-South cooperation." Between 2005 and 2022, Chinese foreign direct investment in Latin America amounted to USD 136 billion. The main recipients were Argentina, Brazil, Ecuador, and Venezuela. China is already the second largest creditor of Latin American external debt; according to Bloomberg, the most indebted countries are Venezuela, Brazil, Ecuador, and Argentina. And it turns out that the creditor's laws require its companies with port terminals outside its territory to accommodate the war navy if necessary. Chinese investments in Latin America have an evident geostrategic purpose. They are much more than Foreign Direct Investment. Chinese presence has also aroused old regional suspicions. Chilean Vice Admiral Ignacio Mardones concludes that "if we expect to compete with a complex that will receive post-Panamax vessels [like Chancay], it is necessary to finalize the large-scale port project in San Antonio, which will allow the reception of larger ships and, therefore, more cargo. Otherwise, Chilean national ports may be limited to transit to and from Chancay." Any developing country would wish for a project like Chancay. But the management and promotion of it could pressure the recipient country with an advantage to return the favor, perhaps allowing the exploitation of mineral resources abundant in the Andes and scarce in the People's Republic of China, or facilitating the construction of the central bioceanic railway corridor between Brazil, Bolivia, and Peru, proposed by Xi Jinping in 2013. This railway will have a demand of 30 million tons of cargo and around 13 million passengers per year from the outset, giving greater competitiveness to Brazilian exports, opening a commercial route to the Pacific for Bolivia, and consolidating China's position as the main trading partner of South America.