Security fears as China opens huge port in Peru to extend Latin America reach

Chinese leader Xi Jinping will inaugurate a huge port in Peru, expected to attract $US3.6 billion ($5.6 billion) in investment over the next decade, creating a direct route across the Pacific Ocean and extending Beijing’s influence in Latin America.

The port opening, which comes ahead of the Asia-Pacific Economic Co-operation forum and Xi’s final meeting with US President Joe Biden, underscores China’s growing clout in a region that once looked primarily to the US for economic opportunity.

Peru’s President Dina Boluarte and Chinese President Xi Jinping during a welcome ceremony at the government palace in Lima, Peru, on Thursday.Credit: AP

Chinese companies are involved in almost every aspect of the deepwater port in Chancay, about 80 kilometres north of the capital, Lima.

The high-tech logistics hub will be exclusively operated by Chinese shipping giant Cosco, which in 2019 invested $US1.3 billion to take a 60 per cent stake in the project. Chinese state media has estimated the total cost of the finished project to be over $US3 billion.

The first phase, building a port that will handle only smaller ships, is expected to begin operations this month.

Its automated cargo cranes are supplied by Shanghai Zhenhua Heavy Industries, a company that congressional investigators have said poses a security risk to US ports. Electric driverless trucks made by Chinese companies will be used to handle containers and cargo.

The level of Chinese interest and involvement in Chancay has drawn warnings from the US about Peru potentially being used by Chinese military ships as a foothold in the Americas.

General Laura J. Richardson, the recently retired former head of US Southern Command, said Chancay “absolutely” could host Chinese navy warships following a “playbook that we’ve seen play out in other places”, in a recent interview with the Financial Times. Beijing has denied the project is motivated by anything other than commercial interest.

“The Chinese are not necessarily interested in a grand display and stationing a warship there, but they like to know it’s an option,” said Ryan Berg, director of the Americas Program at the Centre for Strategic and International Studies, a think tank.

Chinese and Peruvian officials have celebrated the project as a transformative opportunity for Peru to become a central hub for South American goods from its biggest trading partner.

The Chinese-funded port in Chancay, Peru.Credit: AP

President Dina Boluarte, who is set to unveil the project alongside Xi, has called it a potential “nerve centre” joining the continent to Asia, one that could create 8000 jobs and $US4.5 billion in economic activity annually.

Even without potential military use, the port highlights the continent’s increasingly strong ties with China.

Chinese interests in Latin America are fast evolving beyond mining and other extractive industries to include agreements to provide surveillance technology and ground stations for Chinese satellites.

But US concerns about the port being used by the Chinese military haven’t resonated in Peru, which has welcomed the prospect of a high-tech hub attracting investment to the region, said Leolino Dourado, a researcher affiliated with the Centre for China and Asia-Pacific Studies at Universidad del Pacifico in Lima.

“Latin America, and the Global South in general, want to sell their products to whoever they can, so this sort of fearmongering is unlikely to work,” Dourado said.

When completed, the port’s 15 docks will be the first place in South America able to host carrier ships too big to fit through the Panama Canal.

Chinese researchers have said the route will cut costs and shorten sailing times by 10 to 20 days, attracting business from other hubs in the region.

It could also make Peru an attractive destination for Chinese companies searching for new export markets or even locations to set up factories in the Americas. On a visit to China in June, Boluarte cited Chancay as a reason for Chinese electric car giant BYD to consider establishing an assembly plant in the country.

The Chinese takeover of Chancay has not been without controversy in Peru, however.

The Peruvian port authority tried this year to alter the terms of Cosco’s investment deal, citing an “administrative error” when agreeing to grant the Chinese firm exclusive operating rights over the seaport for 30 years. The lawsuit was dropped in June days before Boluarte travelled to China to meet Xi.

Chancay will join an expanding global network of more than 40 ports under the Belt and Road Initiative, a $US1 trillion plan to build transportation and technology infrastructure launched by Xi in 2013.

Despite claims of Chancay being a purely commercial venture, Chinese foreign policy experts have written about the project as a geopolitical win for Beijing that will need to be defended from American interference.

US President Joe Biden arrives in Lima, Peru, for the Asia-Pacific Economic Co-operation summit. Credit: AP

The port’s geopolitical importance makes it “inevitable” that the US will try to weaken Chinese control after the project is complete, researchers at Fudan University in Shanghai said in a recent article.

Xi and Boluarte are also expected to sign an expanded free trade agreement. China has been Peru’s largest trading partner for a decade. The countries traded $US36 billion in goods last year, compared with Peru’s $US21 billion trade with the US.

For Beijing, the port promises to bring together a string of existing investments in Peru and neighbouring countries.

China has ambitions to build a railway line connecting Chancay to Brazil, its largest trading partner in Latin America, and Chinese firms are in the process of taking over electricity distribution for Lima.

Chinese investments in the Peruvian mining sector total $US11.4 billion. The majority of that is focused on securing access to copper, which is essential to the manufacturing of electronics and clean energy technologies.

With nearly all the world’s copper refining happening in China, the Chancay port will help Beijing improve its access to mines in South America’s second-largest producer of raw copper.

“That chokehold on the supply chain is absolutely critical and dominant,” said Berg, the CSIS analyst.

The Washington Post

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