Chinese President Xi Jinping inaugurated Peru’s Chancay Port on 14 November 2024, describing it as the starting point for a “new land-sea corridor between China and Latin America”. Funded under China’s Belt and Road Initiative (BRI), the massive $3.6 billion project has also raised concerns in US policymaking circles over Chinese influence in a region traditionally seen as its backyard. Apart from its geopolitical implications, the deep-sea port has been billed as a game-changer for South America. A 2023 article in The Diplomat said, “One of the most outstanding features of the Chancay New Multipurpose Port Terminal is its capacity to receive vessels of up to 18,000 TEUs (Twenty Foot Equivalent Units), the largest shipping vessels in the world. To date, no vessel of this size has not arrived in Latin America. This capacity will position Chancay as a strategic port on a global scale.”

Chancay Port project

• Located about 78 km north of the Peruvian capital of Lima, Chancay is a small fishing town with a population of around 60,000. It is a natural deep-water port, however, previous feasibility studies on building up infrastructure pointed out heavy construction costs. China began construction in 2019 and the China Ocean Shipping (Group) Company or COSCO now owns 60 per cent of the port, with a local company owning the rest.
• An article in China’s state media outlet Global Times noted its significance: “Currently, most of Peru’s cargo to Asia and Oceania needs to transit through Central America or North America, and the throughput cannot meet the needs of foreign trade upgrades.” In order to reach South America, bigger cargo ships first go to ports in the United States or Mexico and their goods are offloaded onto smaller ships.
• Chinese media also reported that the port will reduce the transportation time of goods exported from Latin America to the Asian market from 35 days to 25 days, greatly reducing logistics costs and generating jobs. The port is expected to generate $4.5 billion in annual economic benefit for Peru, equivalent to 1.8 percent of the country’s GDP, a Global Times editorial said.
• Key trade items here include copper, blueberries and soybeans. Crucially, Bolivia, Chile and Argentina also form the “lithium triangle” together. The element is in great demand over the lithium-ion batteries used to power the growing numbers of Electric Vehicles worldwide. A report from the International Energy Agency noted that more than one in three new car registrations in China was electric in 2023, compared to over one in five in Europe and one in 10 in the United States.

US concerns over Chancay

• Media reports have quoted several US officials flagging the project recently. In June, The Wall Street Journal quoted Army General Laura Richardson, former head of the U.S. Southern Command, saying, “This will further make it easier for the Chinese to extract all of these resources from the region, so that should be concerning.”
• Brazil, the largest economy in the continent, has announced plans to enhance its road connectivity to Chancay. The South China Morning Post also quoted Erik Bethel, a former US representative at the World Bank during Donald Trump’s previous presidency, speaking at a conference this May. He said, “Wait until the port of Chancay in Peru gets connected to Brazil. That’s going to be a wake-up call for all of us.”
• For long, the US has remained the major player in the region, delivering aid and loans but also interfering with the continent’s governments. In line with its “containment” policy during the Cold War, it sought to prevent the expansion of Communist ideology. The continent’s resources, such as oil and precious metals, were also an incentive for extending its influence.
• While the US remains South America’s biggest trade partner, China has increasingly made inroads in the continent as its own economy has grown. “China is Peru’s largest trade partner, largest export market, and largest source of imported goods, while Peru is China’s fourth largest trade partner in Latin America,” Global Times noted.
• Some experts also believe China has taken advantage of the US shifting its foreign policy focus on other regions of the world, such as the Middle East and Europe. But in South America, this is not seen as a necessarily bad thing.
• According to WSJ, Peru’s Foreign Minister Javier González-Olaechea said that if the US was concerned about China’s growing presence in Peru, then it should step up its investments. “The United States is present almost everywhere in the world with a lot of initiatives, but not so much in Latin America,” González-Olaechea said in an interview. “It’s like a very important friend who spends little time with us.”
• With the incoming Trump presidency, given his recent mentions of the region largely for curbing illegal immigration to the US, there is again concern about US focus shifting away, paving the way for Chinese presence.

Larger BRI concerns

• Critics have questioned the ambitious economic benefits projected from BRI works undertaken across the global south. For instance, China-funded several train connectivity projects in Southeast Asia have seen revisions made to their original high costs and have been delayed.
• Then there is the case of the Hambantota port in Sri Lanka. Its 99-year lease was given to a Chinese company after Sri Lanka failed to pay back Chinese loans for the project. It led further credence to accusations of “debt-trap diplomacy” by China. With the Chinese economy also slowing down in recent years, there are further questions about the viability of BRI projects.