Amid conflicts over the exclusivity agreement, threats from the US and the opportunity to boost agricultural exports to new markets, the first stage of the megaport is approaching its inauguration.
70 km north of Lima, in Chancay, an old fishing cove, a consortium linked to the Chinese State is building the first megaport in the South American Pacific. The slogan “From Chancay to Shanghai” is not a simple slogan, but a summary of the impact that this colossal work will bring to the foreign trade of Peru and South America.
We are talking about a pharaonic project, whose inauguration of its first stage has motivated the imminent visit of Xi Jinping, president of the People's Republic of China, to Peru in November. The Asian president will also attend the Summit of the Asia-Pacific Economic Cooperation Forum (APEC) Peru 2024, an international event that Peru will organize for the third time in a dramatic context: economic recession, decline in credit rating and increase in poverty are some of the problems that today afflict the host country.
Despite these challenges, the so-called Chancay Multipurpose Port Terminal, built by Cosco Shipping Ports, stands as a hope for various economic actors in Peru, especially entrepreneurs in primary sectors. The shipment of agricultural exports from Lima to Shanghai would go from lasting 40 days to only 25. For María Osterloh, professor and researcher at the Center for Asian Studies at the Universidad Nacional Mayor de San Marcos (Peru) , the absence of stops on the trip is important .
“Chancay is going to constitute a hub in South America, which will multiply economic relations between Peru and its trade partners. From the Pacific basin a direct route to Asia will be generated, which will reduce logistics costs. Agro-export products will greatly benefit, since, normally, the “direct” route we have to Asia goes first to Central America, Mexico or the US and then goes to China. This makes it difficult to export perishable products,” declared Osterloh for AméricaEconomía .
Under the current panorama, such a long trip makes it difficult for products such as Peruvian avocados and blueberries to last in stores in Thailand or China. This ultimately increases final sales costs and reduces expectations of consolidating the Peruvian presence in new markets.
In that sense, shortening trips would put an end to this obstacle and in turn would help to make the most of the Free Trade Agreements (FTA) that Peru has signed over the last decades with emerging economies such as Malaysia and Vietnam, as well as than developed nations like Australia and New Zealand. These links not only boost agricultural exports, but also the shipment of textile products, derived from cotton or animal fiber, highly recognized by tourists and foreign firms.
“We cannot fail to mention the products we buy to develop mining or the hydrocarbon industry. From China, we import capital products such as excavators, light cars, as well as Chinese trucks. All of this will also have a positive impact on the final price to be paid by the Peruvian consumer,” Osterloh acknowledges.
CHINA IS PROJECTED IN THE PACIFIC
The choice of Chancay by Cosco Shipping Ports and the Beijing regime to build a megaport is not coincidental. It is located on the central coast of South America, which facilitates its quick connection with nearby ports such as Valparaíso (Chile) and Guayaquil (Ecuador). Although in addition to the obvious links with neighboring countries and Asian markets, other continents are not out of the equation.
“Cosco Shipping Ports has a large global presence. It has more than 16 ports outside China and some of them are the largest and most important in Asia and Europe. So, let's say that the construction of this port in Shanghai responds to an integration of these existing Cosco ports with South America. Being part of this shipping route associated with Cosco would bring even more advantages to Peru,” explained Stephani Maita, senior economist at the Peruvian Institute of Economics (IPE), to AméricaEconomía .
Other countries have already experienced the investments of the Chinese consortium in their ports. Maita gives as an example the port terminal of Piraeus in Greece, which today, after Cosco Shipping assumes its entire administration, has become one of the main ports in the Mediterranean and an important generator of employment.
"In general terms, the presence of large-scale investment projects that are properly executed are associated with greater dynamism of the economy, generation of employment and profits, as well as the fact that Cosco brings with it technology that is not necessarily used in many of the countries it reaches,” highlights the Peruvian economist.
However, China is not always transparent with its trading partners. For Jorge Antonio Chávez, an internationalist expert in Asian politics and professor at the San Ignacio de Loyola University (Peru), a basic principle to consider in these projects is sustainability. In other words, the ability of countries to pay for built infrastructure.
“For example, I can mention the case that happened in the port of Hambantota, in Sri Lanka. The Chinese built the port, but the Sri Lankan government did not have the capacity to pay this debt and therefore, a concession was given for a series of years to China so that it could manage the port,” Chávez told AméricaEconomía .
From this premise, the internationalist believes that the positive or negative balance in the construction of ports with Chinese capital is found in the States' capacity for negotiation and fulfillment of commitments.
Although the Peruvian State still has the obligation to build competent road infrastructure to optimize the performance of the megaport, in recent months, the construction of large projects such as the Peripheral Road Ring and the New Central Highway have been discussed. However, for Stephani Maita something essential has been neglected: access to the port from Lima.
“The Panamericana Norte is not one of the best national roads that Peru has, in fact it is one of the most congested. The current Central Highway is in a similar situation. So, solving these mobility issues will be key for Chancay to reach its potential. I can mention three complementary works: a new road network on the Panamericana, a grade-separated viaduct, which functions as direct access to the port and a fast track between Chancay and Chaclacayo (a town east of Lima),” explains Maita.
THE LEGAL CONFLICT
In the legal field, complications also remain. Originally, on February 10, 2021, the National Port Authority of Peru (APN) and Cosco Shipping signed an agreement for the latter to exclusively exploit the essential services of the future port. However, confusingly, on March 27, the APN, through the public attorney's office of the Peruvian Ministry of Transportation and Communications (MTC), filed a lawsuit to declare the agreement null and void under the pretext of an "administrative error."
A month later, on April 29, the Judiciary declared the claim inadmissible due to non-compliance with admission requirements. The decision was also justified by the modification of the National Port System Law, approved in the first vote by the Peruvian Congress on the 17th of that same month.
These changes now allow “the owner of a private port for public use that has a port authorization to provide port services exclusively.” Along the same lines, it is specified that once the port authorization has been granted, the APN immediately grants “exclusivity in the provision of essential port services requested by the owner of the private port together with the port license.”
“In this case, the port of Chancay is a private property. It does not have a contract with the State and the only thing it did was request the relevant permits to be able to function as a port. Obviously, it does not only include the port, as it also includes an industrial park, warehouses, housing complexes, among others. For this reason, I consider that the APN's demand was wrong,” says María Osterloh.
It should be noted that on April 16, the general manager of Cosco Shipping, Chen Lui, sent a letter to the Peruvian Ministry of Economy with the purpose of starting negotiations regarding the controversy over the exclusivity of services of the megaport. Although the decision of the Judiciary works in favor of the Chinese company, Congress must still ratify the reforms to the National Port System in a second vote. However, the Peruvian government to date has not offered any response.
When asked about a possible outcome of the dispute, Chávez affirms that due to the importance of the port for the Peruvian economy, involving an investment of more than US$3.4 billion, the conflict will be resolved amicably. If this were not the case, the development of greater economic cooperation or investment initiatives in the future would be unfeasible.
THE RIVALRY WITH THE UNITED STATES
The massive arrival of Chinese capital to Peru has set off alarm bells in the United States, to the point that in October 2023, a US official anonymously declared to The Financial Times that “on major geostrategic issues, the Peruvian government is not sufficiently focused.” in analyzing the benefits and threats for the country.” In this regard, Osterloh questions this position. “It is not only important that the United States cares about this type of Chinese investment, but that it can also do something. “Where is the US to build precisely these great infrastructures that we urgently need?”
From his perspective, Chávez considers that Washington's calls to reconsider the decision to allow the construction of the Chancay port point to concern about the fact that China has already positioned itself as the main trading partner of Latin American countries. It is a trend that includes the installation of 5G Internet networks and the use of technological initiatives such as TikTok, through which they believe that the Chinese government can access users' personal data.
“So, there is a concern, there is a, in some way, a vocation to securitize Chinese investment in the region. And we must consider that the United States in this competition has a position of vulnerability, because unlike what happens with China, which is a country that has public companies that are under the control of the State party, the United States does not have control over its private economic actors,” highlights Chávez.
Given this inability to control the expansion of its technological giants as its rival does, the United States perceives a threat to its “relative power.” But what is really happening with Peru in the long term? Well, although Cosco Shipping manages the megaport exclusively, this does not mean that the Peruvian State loses its ability to supervise the company's operations, such as activities that negatively impact the environment.
“To the extent that there is no dual use of the port, that is, that the port is not also used for non-consensual military purposes, then I would not see a national security problem from that point of view,” concludes Chávez.
