Starting Latin America trip, Xi Jinping opens huge port in Peru funded by China

LIMA – Chinese President Xi Jinping launched a week-long diplomatic blitz of South America on Nov 14 by inaugurating a massive deep-water port in Peru, a US$1.3 billion (S$1.75 billion) investment by Beijing as it seeks to expand trade and influence on the continent.

With China’s demand for agricultural goods and metals from Latin America growing, Mr Xi will participate in the

Asia-Pacific Economic Cooperation summit in Lima,

then head to the Group of 20 summit in Rio de Janeiro next week, during which he will also make a state visit to Brazil.

Mr Xi and Peruvian President Dina Boluarte on Nov 14 participated by video link in the opening of the Chancay port, about 80km north of Lima on the Pacific Ocean, and signed a deal to widen an existing free trade agreement.

Mr Xi said that Chancay, a 15-berth, deep-water port, was the successful start of a “21st century maritime Silk Road” and part of China’s Belt and Road Initiative, its modern revival of the ancient Silk Road trading route.

“China is willing to work with the Peruvian side to take the Chancay project as a starting point to forge a new maritime-land corridor between China and Latin America and connect the Great Inca Trail,” Mr Xi said, referring to a 15th century mountain network that joined the Inca Empire.

In an opinion article in the El Peruano state newspaper, Mr Xi said the Chancay project would generate US$4.5 billion in annual revenue, create more than 8,000 direct jobs and reduce the logistics costs of the Peru-China route by 20 per cent.

The China-controlled megaport was built by Cosco Shipping Ports and received US$1.3 billion in Chinese investment for its first phase. China is expected to spend billions more as Beijing and Lima work to position it as a major shipping hub between Asia and South America.

The first ship is due to set sail from Chancay next week, transporting Peruvian fruit to China, Mr Mario Ocharan, Peruvian director of the Chancay Chamber of Commerce, said.

China’s main motivation for developing the megaport, according to Mr Ocharan, was access to neighbouring Brazil, where a new railway line is planned to carry Brazilian exports such as soya beans and iron ore to the port.

The rail project is estimated to cost US$3.5 billion, according to Mr Mario de las Casas, corporate affairs manager at Cosco Shipping Chancay Peru. Building that link is crucial to improve transportation of soya beans as Brazil is the top seller of the commodity to China, he said.

Geopolitical and economic headwinds

The inauguration of the port comes at a time when Beijing is looking to further tap the resource-rich Latin American region, amid trade tensions with Europe and concerns about future tariffs from the incoming Trump administration in the US.

Mr Xi is accompanied by a delegation of more than 100 Chinese business executives, including heads of companies with the largest investments in Peru, such as Cosco Shipping and mining firm Chinalco, which owns the Toromocho copper mine.

Dr Robert Evan Ellis, Latin America research professor at the US Army War College, said that because Chancay is a 15-berth deep-water port, it will allow for more direct routes between both sides of the Pacific, significantly reducing shipping costs and times.

“In the big war between the global shipping alliances, it really positions Cosco... Chancay illustrates how China seeks secure access to resources and markets and its ever more successful fight to corner global value added,” he said.

Chancay, China’s largest investment in a Latin American port, has raised alarm bells in Washington. General Laura Richardson, former US Southern Command chief, warned earlier in November before retiring that Chancay could be used by the Chinese military’s navy and for intelligence-gathering.

US anxieties about Chancay reflect a broader, decades-long shift in a region known as Washington’s backyard that has seen China overtake the United States to become the largest trading partner of countries like Peru.

China’s state-backed Global Times wrote in an editorial published on Nov 11 that the port was a “bridge for practical cooperation between China and Latin America and is by no means a tool for geopolitical competition”, calling US accusations of the port’s potential military use “smears”.

Dr Evan Ellis said the fact that Cosco has exclusive use of the port means there is a realistic possibility that it would be used for military purposes in a war.

Referring to China’s People’s Liberation Army, he said: “This is the Cosco that works hand in hand with the PLA during non-combatant evacuation operations in Yemen and Libya, and various other places around the world, so there’s no question about the established, expected cooperation with the PLA Navy.” REUTERS