If the predictions come true, Peru will be the epicenter of a logistical rearrangement at the continental level when the mega port begins operating at the end of this year. But, for this to take place, the project will require complementary developments that today are far from being completed. And countries like Mexico, Chile, Colombia and Ecuador are advancing in parallel with their own investments.
“Chancay will become the main logistics hub for all of Latin America.” With this forcefulness, Manuel Carpio Rivero, professor of the Master's Degree in Supply Chain Management at Pacífico Business School and CEO of Carpio-Rivero Consultoría Estratégica, describes the expected port development that will be inaugurated in November of this year in Peru, as part of the Week of APEC Economic Leaders.
The new Chancay Multipurpose Port Terminal, located 80 kilometers north of Metropolitan Lima and owned by the Chinese Cosco Shipping Ports (60%) and the Peruvian Volcan Compañía Minera (40%), is considered by the industry the largest port infrastructure in Latin America. The terminal aims to receive large ships and allow direct routes to Asia, avoiding the current pass through the East coast of the United States. “The [Port of Chancay] project is going to reduce navigation days by between 15 and 20. And we will be able to reach China, Japan, Korea and, why not, also Oceania” explains Carpio Rivero about the project whose first stage shows more than 70% progress. Of the total investment of US$3.40 billion, US$1.32 billion have already been executed.
The potential impact of the Port of Chancay transcends Peru and involves the region. Port development could change the way giants like Brazil ship their grain to key destinations like China, for example. “Brazil is the economy that has the most trade in the region. In fact, last March the Minister of Planning and Budget of Brazil, Simone Tebet, was visiting Lima, interested in analyzing what routes they could use to bring their merchandise, their containers,” says Carpio Rivero. Brazil—the main exporter of soybeans to Asia—and Peru have the Interoceanic Route --a land connection that was enabled in 2010 and that would make it very likely that many of the Brazilian products would travel first through that route and then be shipped through the port, after the inauguration Chancay. Thus, they would avoid going around the entire Atlantic. “The added effect is that industries that may not be located in Peru begin to settle in the country to lower their operating costs and be able to go to the Asian market more quickly,” adds Carpio Rivero.
But, to make these wishes come true, there are a series of pending complementary developments that today do not seem as tangilble as the Port of Chancay. Further, if not completed, this could become a threat to achieve the new port's full potential.
Not everything shines
Although the Port of Chancay is recognized as a fundamental project for Latin American trade, not everything that surrounds it is gold. Works such as the Peripheral Road Ring, awarded in April by ProInversión, after more than ten years; the Cercanías Train, which would link Chancay, Lima and Ica; Road Network No. 5; the Sayán-Oyón-Ambo-Huánuco-Pucallpa highway, which would link the central jungle of Peru; the Ancón Industrial Park; and the Huaral-Acos-Huallay-Cerro de Pasco highway are promoted by the Peruvian state to provide connection facilities to the Port. Most of these, however, would be completed only by 2032, according to the country's National Transportation Logistics Infrastructure Services Plan. This implies a difference of almost eight years between the expected start of operations of Port Chancay and the completion of the connection works required.
This situation poses a worrying scenario for the potential collapse at the land level, once the Port's operations begin. “The development of land roads in Peru is behind schedule. The traffic in Lima is calamitous […] and clearly it is going to be a limitation to be able to get the maximum potential of this work,” Carpio Rivero acknowledges about a connectivity gap to which are added the challenges of human resource training and integration of the port with the surrounding towns and the environmental challenge of the operation of a mega structure. “The lack of adoption of advanced technologies and the shortage of trained personnel are also obstacles that limit the efficiency and competitiveness of the logistics sector in the region,” highlights Leonardo Navarrete, commercial manager of STG Chile.
According to the Inter-American Development Bank (IDB), Latin America currently needs to invest around 2% to 3% of GDP annually in logistics infrastructure to close the existing gap and, thus, improve the efficiency of its supply chains. In absolute terms, the entity recognizes annual investments that exceed US$50-60 billion in logistics infrastructure projects in the region, including roads, railways, ports and airports. But, given the possible congestion on traditional trade routes, he emphasizes that it is essential to diversify routes and modes of transport, taking advantage of the interconnection between roads, railways, ports and airports to guarantee the continuity of the flow of goods.
This becomes even more urgent considering that in mid-April the World Trade Organization (WTO) predicted that the volume of global trade in goods will register annual growth rates of 2.6% in 2024 and 3.3% in 2025. And, if the forecasts are confirmed, Asia will contribute more to the growth of trade volume in both periods.
Other ports on the hunt
While the Port of Chancay races against time to exploit its full potential and take advantage of this growth in trade, other countries in the region are silently advancing with their own plans for port and land infrastructure works.
In Mexico, along with the Mayan Train, there are projects for the modernization of the port of Veracruz and the so-called Interoceanic Corridor of the Isthmus of Tehuantepec. This latest railway project seeks to unite the Pacific and Atlantic oceans to create competition for the Panama Canal, and is closer to the United States market. Nicolás Portenza, president of the freight forwarder operator Eternity México, considers that, in addition to requiring investments to improve port capacity, the country of President Andrés Manuel López Obrador still needs to improve access, roads and security. “The increase in Mexico's supply, in terms of maritime capacity, generates traffic jams in port terminals and delays in decompressing them, whether by train or truck […] The air product continues to grow, more relevant than ever, as an alternative for rapid transportation in a context of high demand,” says Portenza.
Colombia, for its part, is advancing with the Buenaventura port project and the expansion of roads such as the Ruta del Sol. These add to the extension of the south dock of the Port of Cartagena, which optimizes operation and safety, adding energy efficiency and photovoltaic modules for on-site generation.
Chile is also carrying out projects in the Port of Valparaíso and the improvement of Route 5 or Pan-American Route. Among different works in the southern country, the construction of the Outer Port of San Antonio stands out --a US$4 billion investment that is still in the environmental evaluation stage. The investment considers two new port terminals that will allow more than doubling the region's current transfer capacity and receiving 400-meter-long container ships.
Finally, Ecuador has just announced an investment of approximately US$140 million for phase 2 of the Posorja Deep Water Port, operated by DP World, which will expand its dock to enable direct access to international markets. “From the point of view of port infrastructure, in South America we are in debt. And that is also reflected in the extra costs that exist in the ports,” warns Gonzalo Davagnino, CEO of the firm Arlog and former general manager of the Port of Valparaíso in Chile.
In addition to the public and private efforts promoted in Colombia, Peru and Ecuador, firms in the sector, such as the D&C Group, are thinking about moving towards the opening of cabotage or giving a definitive boost to the use of the railway. “This is the basis of what we could call 'corridors' or 'continental bridges'. It is the way to unite productive regions or territories with their ports of departure to international markets, through different modes of transportation, using shipping, air, rail or truck capacity interchangeably and in combination,” describes Carlos Gil, executive president of the D&C Group.
All this while the region continues to battle more structural threats to investment and logistics development, such as political instability, economic volatility and insecurity.
