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  July 4th, 2024 | Written by

A Chinese-backed Peruvian Port has the US Spooked 

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A Chinese-financed megaport in Peru aims to accelerate the continent’s trade with China, but Washington is growing uneasy with continued Sino-influence so close to home.  

Read also: U.S. Increases Tariffs on Chinese Imports to Protect Domestic Industries

Few people outside of Peru had heard of Chancay, a sleepy city of just over 50,000 residents 45 miles north of Lima. But, when a port project was pitched as part of Chinese President Xi Jinping’s signature Belt and Road Infrastructure Initiative (BRI) to the Peruvian government, it didn’t take long to align the two nations. 

Launched in 2013, BRI initially intended to connect East Asia and Europe through physical infrastructure projects. However, over the last decade, China has rapidly expanded its reach, extending BRI into Oceania, Africa, and Latin America. Currently, around 147 countries, representing two-thirds of the world’s population and a staggering 40 percent of global GDP, are either engaged in BRI projects or in the pipeline to do so. 

The $3.5 billion Chancay port is funded by Chinese bank loans and majority owned by the China Ocean Shipping Group (Cosco). Other regional ports have larger container-handling capacity, but at roughly 60 feet of depth, the Chancay port will be the first Pacific Coast port in South America capable of receiving megaships. The appeal of megaships rests on their delivery capacity, but ports require costly dredging and infrastructure improvements to accommodate them. In this respect, without Chinese financing, a Peruvian port of this size was unthinkable.

One of the attractive selling points of the port was the notable reduction in travel time from the region to China. The trans-Pacific journey currently spans 35 days with stops in large ports such as Long Beach, California. Estimates point to a massive reduction to just 20 days from Chancay to Shanghai once operational. Moreover, the seventh-largest economy in the world is now in the neighborhood, and analysts expect future Chinese investment to connect Chancay and Brazil via the construction of new highways and railways.

Washington’s worry is two-fold: expanding Chinese influence in the region and the potential for future military installations. While BRI projects have grown significantly, and the Chinese potential for expanded military presence is vast, to date China operates just one logistics base in Djibouti and a paramilitary outpost in Tajikistan. Yet, a recent RAND report details Chinese interest in Cambodia, Equatorial Guinea, Namibia, the Solomon Islands, the UAE, and Vanuatu. Couple those with a March 2024 Newsweek report of additional interest in Cuba, Pakistan, Tanzania, Sri Lanka, and Myanmar, Washington’s anxiety does not appear irrational. 

Chancay Port will boast an initial 1.5 million TEU capacity, and China is already the principal trade partner of nearly every South American country. Peru has had a long history with the Asian superpower, and Chinese firms control nearly all of the capital city’s power distribution and hold significant investment positions in at least five mines.    

When BRI was first announced, China was wrestling with US influence through the Trans-Pacific Partnership (TPP) and the Obama administration’s free trade initiative with Europe. For China, infrastructure spending seemed like an easy way to deal with excess foreign exchange reserves, an oversupply of goods with weak domestic demand, and Xi’s central message of the “rejuvenation of the Chinese nation.”

Like the US Marshall Plan after World War II, BRI’s proponents argue that China is responding to developing country infrastructure demands. Moreover, the fact that these initiatives are ongoing and do not have hard completion target dates allows China to declare success as it sees fit. 

From a pure commercial and trade perspective, Chancay to Shanghai in 20 days is an extraordinary win. US interests in the region might believe otherwise, but development projects in Latin America are not apportioned solely to China.