The port of Chancay, at position of the state-owned shipping company Cosco, will begin operations in 2022.

The Chinese pronounce it almost like Shanghai, but it is not in China but in Peru. The port of Chancay, 75 kilometers from Lima, will become the first Chinese logistics hub for the Pacific side of Latin America. It is the only port in the region for the state-owned shipping company Cosco, which once established its European gateway in Piraeus at entrance and is now preparing its goods access to South America through Chancay. The infrastructure represents an investment of 3 billion dollars.

Computer-aided design of the facilities of the new port of Chancay, 75 kilometers north of Lima [Volcan].

article / Gabriela Pajuelo

The port of Chancay intends to become one of China's main connections with the countries on the west coast of South America, serving as a bridge for the growing trade of goods from this region with Asia-Pacific. Through the company Terminales Portuarios Chancay, the Chinese Cosco Shipping Ports contemplates an initial investment of 1.2 billion dollars, destined to the first phase of project -construction of new dikes to gain ground to the sea, achieving a greater depth (16 meters) and surface for operations (one million containers). The total investment will be US$3 billion; the entrance is expected to be operational by 2022.

China has been Peru's leading trade partner since 2014, ousting the United States from that position. In 2017 China was the destination of 26% of Peruvian exports (US$11.7 billion) and the origin of 23% of its imports (US$8.75 billion). Chinese interest is focused on minerals, the largest Peruvian export sector, and therefore the port of Chancay is emerging as the main exit point for these raw materials to China. Return freight will bring Chinese manufactured goods, not only to Peru but also to neighboring countries.

Beijing's interest in Peru's raw materials has already led to a free trade agreement between the two countries in 2009, which was improved last year, signature . It is a relationship that has not been complicated by the granting of high credits that the recipient country then has difficulty refund: Peru has only received credits from Chinese public lending institutions amounting to 50 million dollars in 2009, which places it at the bottom of the list of recipients of Chinese loans in Latin America.

Cosco acquired 60% of Terminales Portuarios Chancay for US$225 million in the first half of 2019, sharing a partnership with the Peruvian mining company Volcan, which owns the remaining 40%. This is the first port that the large Chinese state-owned shipping company will control in its entirety in the Western Hemisphere, since its presence in the port of Seattle, in the USA, is limited to the operation of a terminal. Cosco has 34 terminals worldwide, 11 of which are outside China (in Spain it has a presence in the ports of Valencia and Bilbao). Other Chinese companies also have terminals in the region, such as in the mouths of the Panama Canal (China is the second largest Username of this inter-oceanic waterway, after the USA), or are involved in port expansion works, such as in Itaqui (Brazil). Beijing has also expressed interest in managing complete ports -the case of La Unión, in El Salvador-, but Chancay is the first project in this sense.

The new port of Chancay, covering almost 1,000 hectares, will include an entrance complex, a subway viaduct tunnel, and an operational port area. This will have a container terminal with two docks, and a bulk, general cargo, and roll-on/roll-off terminal with another two docks. According to the company, the port will have an annual cargo handling capacity of one million TEUs (Twenty-foot Equivalent Unit). It should be added that the port complex will have the capacity to unload Triple E vessels, considered the second largest container ships in the world.

The multi-port is located 75 km north of Lima and will be connected to the center of the country via a highway to Oyón and Ambo, in the Peruvian Andes. This road infrastructure, with a public investment of US$450 million, represents a decentralization effort by the Peruvian government.

The port of Chancay could pose a serious skill to the Callao Port Terminal, managed by DP World Callao (business subsidiary of Dubai Ports World), APM Terminals and Transportadora Callao. This is Lima's de facto port and is the country's main port in terms of traffic and storage capacity, with a port movement in 2018 of 2.3 million TEUs and 56 million tons, representing 51% of the national total.

Cosco Shipping Ports terminals in the world [Cosco Group].

The Minister of Transport and Communications, María Jara Risco, has announced a plan to double the storage capacity of the port of Callao, but, it is questioned if this will be enough to compete with the new port of Chancay. President Martin Vizcarra, sample , is convinced that both facilities can work in a complementary way, and that the new infrastructure will allow decongesting truck traffic in the capital's area .

Chinese investment, in any case, has given rise in some media to talk about "checkbook diplomacy", a concept that refers to the use of investments or loans to establish favorable relations with countries that occupy strategic positions in regions of geopolitical interest. Although an infrastructure such as Chancay is highly interesting for the beneficiary country, it may be obliged to refund the favor in other ways, perhaps by allowing the exploitation of mineral resources. Apart from that, there are the internal Chinese provisions, which oblige its companies with port terminals in the rest of the world to host the wartime navy if necessary.

China's growing influence in the Western Hemisphere worries the US. Its own Vice President, Mike Pence, warned Latin American countries that these investments represent a potential threat, because at the very least they establish an excessive dependence on trade and credit ties with China, also generating a high trade deficit and high debt. Also, according to Pence, they may negatively affect issues such as environmental care or respect for protected areas. 

In more dramatic terms, the Pentagon has spoken out. In February 2019, Admiral Craig Faller, head of Southern Command, warned that in the future "China could use its control of deepwater ports in the Western Hemisphere to increase its global operational position."