The port of Chancay, at position of the state shipping company Cosco, will be operational in 2022.

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

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

article / Gabriela Pajuelo

The port of Chancay aims 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 in goods from this region to Asia-Pacific. Through the company Terminales Portuarios Chancay, China's Cosco Shipping Ports is contemplating an initial investment of 1.2 billion dollars for the first phase of project - construction of new dykes to gain ground to the sea, achieving a greater depth (16 metres) and surface area for operations (one million containers). The total investment will be USD 3 billion; the entrance is expected to be operational by 2022.

Since 2014, China has been Peru's leading trade partner partner , replacing the United States. In 2017, China was the destination of 26% of Peru's exports (11.7 billion dollars) and the origin of 23% of its imports (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 manufactures, not only to Peru but also to neighbouring 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 large loans that the recipient country then finds difficult to refund: Peru has only received loans from Chinese public lenders to the value of 50 million dollars in 2009, which places it at the bottom of the list of recipients of Chinese loans in Latin America.

Cosco took over 60% of Terminales Portuarios Chancay for $225 million in the first half of 2019, sharing a partnership with Peruvian miner 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, as its presence in the port of Seattle, in the USA, is limited to the operation of one 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 a terminal in the region, such as in the mouths of the Panama Canal (China is the second most important 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 entire ports - the case of La Unión in El Salvador -but Chancay is the first realisation in this sense.

The new port of Chancay, almost 1,000 hectares in size, will include an entrance complex, an underground viaduct tunnel and an operational port area. This will have a container terminal with two berths, and a bulk, general cargo and roll-on/roll-off terminal with two additional berths. According to the company, the port will reach an annual cargo handling capacity of one million TEU (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 centre of the country via a road to Oyón and Ambo, in the Peruvian Andes. This road infrastructure, with a public investment of 450 million dollars, represents a decentralisation effort on the part of the Peruvian government.

The port of Chancay could pose a serious challenge skill to the Callao Port Terminal, managed by DP World Callao (business subsidiary of Dubai Ports World), APM Terminals and Transportadora Callao. This is the de facto port of Lima 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 tonnes, representing 51% of the national total.

Cosco Shipping Ports terminals worldwide [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 there are questions as to whether this will be enough to compete with the new port of Chancay. The President, Martin Vizcarra, sample is convinced that the two facilities can work in a complementary way, and that the new infrastructure will help to decongest the lorry traffic at the capital's area .

Chinese investment, however, has given rise in some quarters to talk of "chequebook diplomacy", a concept that refers to the use of investments or loans to establish favourable relations with countries occupying strategic positions in regions of geopolitical interest. While infrastructure such as Chancay is highly interesting for the recipient country, it may be obliged to refund in other ways, perhaps by allowing the exploitation of mineral resources. Apart from that, there are internal Chinese regulations, which oblige their companies with port terminals in the rest of the world to host the 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, generating a high trade deficit and high debt. They may also, according to Pence, negatively affect issues such as environmental protection and respect for protected areas. 

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