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Chinese Investment in Peru Set to Reshuffle Maritime Trade in South America

The megaport of Chancay is expected to become an exchange and distribution hub, displacing competitors such as Chile.

Port of the future: a model of the new megaport under construction at Chancay in Peru. Image: Ministry of Transport and Communications of Peru

A little more than 50 km from Lima, the capital of Peru, the Chinese company Cosco Shipping Ports is building the megaport of Chancay, which includes 11 berths capable of receiving post-Panamax ships. As an alternative to decongest Callao, it is expected that this new port infrastructure will also be a destination for cargo coming from the east and the central highlands. Thanks to the port of Chancay, it is estimated that the province of Huaral will become the gateway to Peru from Asia and, at the same time, a commercial exchange hub to redistribute cargo to Ecuador, Chile and Colombia.

The geopolitical impact at the local, national and regional levels will be undeniable. Due to its capacity to receive megaships, Chancay could displace important Chilean ports such as San Antonio and Mejillones. In addition, its proximity to the Amazonas multimodal axis of the northeast bi-oceanic corridor that joins Brazil with Peru would not only make the Andean country a distribution centre in the Pacific, but also connect it with the American Atlantic coast.

Several Latin American countries, including Argentina, Bolivia, Brazil, Chile, Costa Rica, Ecuador, Mexico, Nicaragua, Peru and Venezuela, host projects developed and controlled by Chinese companies. Due to China’s ambition to become a global power through initiatives such as the Belt and Road, coupled with the authoritarian nature of its political regime, its interest in certain sectors that could be considered strategic for local economies is ringing alarm bells about its real intentions.

Whether private, public or semi-public, the investments of Chinese companies initially indicate a clear interest in infrastructure projects (ports, highways and railway networks) related to improving Latin America’s capacity to export mining and agricultural raw materials. Since 2015, however, there have been new investments in the energy and telecommunications sectors, including in 5G networks and submarine cables. The construction of an interoceanic canal through Nicaragua that would decongest the Panama Canal has even been mentioned.

Chancay’s Impact on Maritime Routes

The bi-oceanic corridor integrates Peru with the industrial park of Manaus, which allows it to improve its connectivity within the Mercosur trading bloc. The location of the new port of Chancay not only offers logistical advantages related to the capacity of the terminals and their projection towards the northeast bi-oceanic corridor, but also meets security conditions for cargo and trucks that have previously been lost in Callao.

Due to its capacity to receive megaships, Chancay could displace important Chilean ports such as San Antonio and Mejillones

Rather than being just a port, Chancay should be considered a port and logistics complex: when its construction is finished, the project will have two specialised terminals in a 280-hectare primary port area. It will have a bulk cargo, general cargo and vehicle terminal with four berths, and a container terminal with 11 specialised docks for handling container ships. The planned investment for this port complex exceeds $3 billion, and it is expected to move over five million 20-foot equivalent container units (TEUs) per year.

Access to the port complex from the logistics area will be through an underground viaduct 1.8 km long, eight metres high and three traffic lanes wide, which will also connect to the Pan-American Highway in Peru and the Chancay Logistics and Industrial Complex.

It is becoming ever more important to be able to quickly extract cargo from ports, and so this viaduct, added to the planned incorporation of railway terminals at Chancay, will allow the expeditious departure of cargo to its destination. In the case of Peru, this aspect is especially relevant since the port of Callao currently accounts for 86.4% of the country’s port activity, and the congestion generated by the lack of expedited routes and safe areas to remove cargo makes the Chancay port alternative more attractive.

The port of Chancay is currently in its first stage of construction, and plans to have a first general cargo dock operational in the first quarter of next year. The three remaining berths (one for bulk cargo and vehicles, and two container berths) will be able to receive state-of-the-art container ships 400 metres long in the first quarter of 2024, with the task of moving one million TEUs and six million tonnes of bulk cargo. This first stage is expected to cost $1.3 billion.

Of particular mention is the logistics complex, which in the first phase is expected to be 32 hectares in size and will include – among other port facilities – an access road system, a road interchange, a truck centre, an administrative building, service buildings, a container area, a customs area, agricultural and livestock services, and facilities for the Maritime Police.

In a world where the geopolitical centre of gravity has moved from the Atlantic to the Indo-Pacific, the sea is an important element in projecting the capacity of states

The fact that Chancay will have exclusive quarters for the different services that participate in foreign trade, including those already mentioned above as well as customs agencies and logistics facilities, will not only allow it to deliver these facilities to users of maritime trade, but will also contribute to all aspects related to port security, phytosanitary management and even defending against transnational threats from organised crime.

The growth of this port complex will bring various investments to the area related to trade, housing and services, leading to organic growth around the port, which will in turn catalyse further port activities.

Effect on Competitors

Cosco Shipping Ports, the majority owner of the Chancay Port Complex, is the first integrated business operator in the world; owns 12.2% of the container market; and is the largest global port operator, with a 20% greater share than the next three largest operators. It has indicated that once the port construction work is finished, it will only operate in Peru, generating a higher cost of foreign trade for other countries in the region and affecting regional competitors such as Chile.

For Chile, for example, one of the ways to reduce or nullify the effects of part of the maritime traffic coming from China going exclusively to Chancay is to invest in ports that are competitive and highly automated. In terms of port development, the only project known of currently is the planned Outer Port in San Antonio, which, if it manages to pass all the stages of a design of this magnitude, would enter into operation only from the year 2032, when Chancay is already in full operation with its 15 docking fronts and an industrial and logistics complex covering 877 hectares.

In a world where the geopolitical centre of gravity has moved from the Atlantic to the Indo-Pacific, the sea is an important element in projecting the capacity of states. It seems that with the construction of the megaport of Chancay, Peru has understood this, displacing other major maritime actors in the region.

This Commentary is based on a paper published by AthenaLab (in Spanish), which can be found here.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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Original article link: https://rusi.org/explore-our-research/publications/commentary/chinese-investment-peru-set-reshuffle-maritime-trade-south-america

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