The Port of Chancay in Peru is a natural deepwater port controlled by COSCO Shipping Ports Co., Ltd. It is currently under construction and is expected to be completed by the end of this year. As its completion approaches, the United States, which has always considered Latin America as its backyard, is increasingly concerned about its use for military purposes by the PLA.
Offering a deep-water port, Chancay will be able to handle container ships that cannot dock elsewhere in South America.
The port will become "South America's gateway to Asia" and promote trade between China and Peru, Brazil and other countries in the region; at the same time, it could also challenge US influence in the resource-rich region.
US officials tried to block it, highlighting the “Chinese threat” and “military security”, but were ignored by the Peruvian side. This project, aimed at promoting bilateral trade, has been targeted by the United States since its construction.
Once completed, the Chinese-controlled port of Chancay could become South America's "first truly global trading centre". Therefore, the United States fears that China will increase its influence in the "American backyard".
"This is a turning point," said Eric Farnsworth, a former senior diplomat at the U.S. State Department who now heads the Washington office of the Council of the Americas, a U.S.-based think tank. "At this point, it's not just a trade issue, it's a strategic issue." According to Farnsworth, this highlights the diplomatic vacuum left by the United States in Latin America, which is focusing its resources elsewhere.
The United States intervened several times in an attempt to hinder the completion of the project. In May this year, Laura Richardson, commander of the US Southern Command, said that China could use the port for "military purposes". As such, former US officials and former Peruvian officials familiar with the matter have revealed that the US has expressed its concerns to Peruvian officials.
As for daily El Peruano, the upcoming visit of Chinese President Xi Jinping to Lima for the inauguration of the Chancay Multipurpose Port Terminal, during the Asia-Pacific Economic Cooperation Summit in November 2024, highlights Beijing’s interest in Peru’s strategic resources.
Peru, however, ignored US concerns. Peruvian Foreign Minister Gonzalez-Olechea previously responded that if the United States was truly concerned about China's growing presence in Peru, it should increase its investments, adding that the country "welcomes anyone" who invests. In an interview he described the United States as one of those "very important friends who rarely spend time with us."
“The Americans (in Latin America) seem to have been asleep”, also believes John Youle, a well-known Peruvian businessman and former US diplomat, when they saw China start investing in the region, “they suddenly woke up”.
The United States' anxiety concerns not only Peru, but also the entire Latin American region. Brazil, for example, rejected the US request to exclude Huawei and hopes to collaborate with China in the development of semiconductors. Chinese companies are building a subway in Bogota, the capital of Honduras, which has "severed diplomatic relations" with Taiwanese authorities and is receiving huge investments from Chinese lithium mining companies.
Located about 80 kilometers north of the Peruvian capital Lima, Chancay Port began construction in 2011 with an initial investment of US$1.3 billion, and the first phase is expected to be completed by the end of 2024.In 2019, Cosco Shipping Ports Company Limited, a subsidiary of COSCO Shipping Group, acquired a 60% stake in Chancay Terminal.
In August last year, COSCO Shipping Group's head of public relations said that, once completed, Chancay Port will become "South America's gateway to Asia", providing South American countries with a direct route to China, and the sailing time of ships will be reduced by 10 days.
Currently, ships traveling from South America to China must stop in Central America, Mexico or the United States, usually taking more than 45 days to sail.
According to reports, Chancay Port in Peru is a natural deep-water port with a maximum depth of 17.8 meters and can accommodate ultra-large container ships. COSCO Shipping's Chancay terminal includes multi-purpose terminals, container terminals and related infrastructure. The construction plan includes the construction of 4 berths in the first phase, including 2 multipurpose berths and 2 container berths. In the near future, the expected total annual volume will be 1 million TEU, 6 million tonnes of bulk cargo and 160,000 vehicles.
According to the plan, Chancay Port will develop into a major port hub and Pacific gateway port in Latin America, promote local economic development, and become a new connection point and communication bridge for economic and trade exchanges between China and Peru.
This is a commercial project to promote development, there is nothing to hide,” said Gonzalo Rios, deputy director general of COSCO Peru, admitting that the port of Chancay will ultimately accelerate trade between Asia and South America, benefiting customers as far away as Brazil by shortening shipping times across the Pacific for goods ranging from blueberries to copper.
Local entrepreneur Daniel Bustamante expects the port to open up new Asian markets for the blueberries and avocados he grows on the Peruvian coast. For fruit, the current sea route between Peru and China is too long, so its main markets are Europe and the United States. "This will be our window into Asia. We expect to achieve significant growth in this market," he said.
Brazil could also benefit, making the port of Chancay more attractive. Two-thirds of Brazil's iron ore and soybeans are purchased from China, but seaborne exports to Beijing require heading east across the Atlantic Ocean or north through the Panama Canal to the Pacific Ocean.
Omar Narea, an economist at the University of the Pacific in Peru, said that with the Chancay port, Brazilian exporters can cut transportation times to China in half. Furthermore, Brazil is already planning new highways and railways that will lead to the port of Chancai.
Speaking about the port of Chancay, Brazilian Transport Minister Filho said: "Even though some parts are quite complicated, this is a win-win project."
Not everything that glitters is gold
Recent problems at China's mega-port in Chancay have, however, renewed concerns about the poor quality of Chinese businesses, as well as China's true motivations behind its strong stake in what is considered an important trading hub in the region.
In mid-May, following a landslide at one of the construction sites of the port tunnel, which caused the collapse of several houses and roads in the nearby city of Peralvillo and forced the company to suspend construction, the Peruvian Prosecutor's Office launched an investigation into Chinese state-owned companies China Cosco Shipping Ports Ltd. The company was also ordered to report on its work, Mercopress reported.
As part of the project, Cosco is building a 1.8 kilometer tunnel under the Peralvillo locality in the city of Chancay to connect the port with a highway. The project, which will be the largest in the region, with an investment of 3.5 billion dollars, will include 15 terminals to mobilize more than 5 million containers per year. It will also receive the largest merchant ships in the world. This is not the only problem the project faced. In October 2022, the construction of the tunnel led to the partial collapse of a road in the same town, causing residents to fear for their safety.
The risks to national security
There are concerns about China's growing position in the region and the potential dual use of the port.
“China's port construction is linked to its economic interests to exploit, maximize and control global logistics routes, as part of the Belt and Road, to preserve its food and energy security,” Sergio M. Cesarín, coordinator of the Center for Asia-Pacific and Indian Studies at Tres de Febrero University in Argentina, he told Diálogo Americas on July 19.
The new terminal will become a major port of departure for products the region exports to China, including copper and other minerals. It will also connect Chile, Colombia and Ecuador, Peruvian newspaper La República reported on July 13.
The Chancay Port will not only expand COSCO’s influence in the port industry — COSCO has investments in more than 100 global ports — but could also serve as a dual-use facility in Peruvian waters for the Chinese Navy, Newsweek magazine reported. Experts point to Sri Lanka, which unable to repay its debt, gave China a controlling equity stake and a 99-year lease for the Hambantota Port, as an example of the debt trap and risk of erosion of sovereignty.
“We are giving up sovereignty at sea and on land. Why should China control this strategic place and not the Peruvian government?” Miriam Arce, secretary of the Frente de Defensa de Chancay organization, which follows the progress of the port more closely, told Todo Noticias.
Information gathering
Several Chinese companies operate port terminals globally (such as Cosco), some of which are favored by the Chinese People's Liberation Army Navy (PLAN).
While their primary objective is commercial, these facilities also allow the PLAN to conduct various peacetime operations far from its shores.
China's port networks serve as a platform for intelligence gathering. Port operators obtain detailed information on ships, routes, cargoes and other information that could be useful for military intelligence, especially when naval vessels visit commercial ports.
China has a military base in Djibouti, in the Horn of Africa, and plans to establish another in the Ream naval base in Cambodia, on the Gulf of Thailand, to control interoceanic passages in this tense part of Asia, as the Straits of Malacca and Makassar.
The commercial port activities of Chinese companies are an essential part of the puzzle for PLAN planners, who must meet their government's demands to project power abroad.
Financial dependence
China also exercises “soft power” through financing and building ports in countries desperate for development.
The growing trade dependence on China represents a significant challenge for Latin American economies and any retaliatory measures or actions taken by Beijing will have a direct impact on exports and sales.
Dependence and economic coercion are a magic weapon that China has used with all countries.
Latin America is heavily involved in China's port infrastructure expansion plans. Of the world's 100 largest ports, 57 are controlled by Chinese companies.
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