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In South America, Trump loses a trade battle with China with the inauguration of the Port of Chancay
Monday, November 11, 2024 - 08:30
Foto Reuters

This week at the APEC summit in Peru - where the inauguration of the Chancay megaport is scheduled - the United States will see how the Asian giant is gaining prominence in the region, amid a greater realignment of power in a traditional area of Washington's influence.

At the APEC summit in Peru, the United States will see China gaining prominence in the region, amid a greater reshuffle of power in a traditional area of ​​Washington's influence, which awaits the inauguration of Donald Trump as president, known for his trade policies contrary to Beijing.

Peru is set to host Asia-Pacific Economic Cooperation leaders this week, with Chinese President Xi Jinping expected to attend and inaugurate a Chinese-built megaport in the Andean nation. Outgoing U.S. President Joe Biden is also on the APEC forum's guest list.

Peru, the world's second-largest copper exporter, reflects a broader challenge for the White House in South America, where China's presence has grown rapidly due to its huge appetite for the region's key resources: corn, copper, soybeans, beef and lithium, a metal for electric vehicle batteries.

That has made Beijing a key trading partner from Brazil to Chile to Argentina, eroding Washington’s regional political clout — a trend that amplified under Trump’s inward “America First” turn during his first administration and again under Biden.

"The strategic value is that this is America's backyard," said Li Xing, a professor at the Guangdong Institute of International Strategies. He added that this helped counter the US presence in the Indo-Pacific and offset the risks of a trade war.

"China cannot start by building military bases there because it is too sensitive and will make China's conflict with the United States too pronounced (...) Therefore, it has moved forward with economic ties first," he said.

Peru demonstrates the dramatic shift. China’s trade advantage over the United States rose to $16.3 billion last year, according to data from the U.N. Comtrade Commission, a radical change from just a decade ago, when Washington was the dominant player. This has been accompanied by investments in sectors such as energy and mining.

China surpassed the United States in trade with Peru in 2015, widening the gap during the previous Trump administration (2017-2021) and again during the Biden administration.

"China has entered the region aggressively, is learning quickly and is prepared to stay for the long haul," said Eric Farnsworth, a former State Department official who now works at the Council of the Americas and the Americas Society.

"Unless the United States significantly prioritizes regional economic policy in a new and effective way, the region will continue to tilt toward Chinese interests," he added.

The U.S. Embassy in Lima did not respond to a request for comment on the report.

Washington officials have repeatedly warned publicly that Chinese investment in the region comes with conditions and have asserted that the United States is a more reliable partner.

A NEW SINGAPORE

An example of this change is the megaport 80 kilometers north of Lima, in Chancay, built by the Chinese state-owned Cosco Shipping and which promises to shorten maritime routes to Asia for both Peruvian and Brazilian products.

The Chinese-controlled megaport, to be inaugurated by Xi when he visits Peru, has raised concerns in the United States about regional security, but more importantly, it will boost the region's trade route to China.

Peru's Minister of Transport and Communications, Raul Perez, said during a recent visit to the port that Chancay is seen as "clear competition" to the deepwater Pacific ports of Manzanillo, Mexico, and Long Beach, in the United States, where large ships can make direct trips to terminals in Asia.

Reyes said that from Chancay, trips from South America to Asia will be reduced by 10, 15, 20 days depending on the route.

"Our goal is to become the Singapore of Latin America," said Perez, referring to the maritime hub of Southeast Asia and in front of cranes up to 90 meters high that can move 50 containers per hour, according to the Chinese firm.

The Pacific coast port is generating plans and investment projects to boost connectivity, especially for soybean producers from Brazil, who are interested in reducing shipping costs and travel time to Asia, and avoiding passing through the Panama Canal to the north.

A possible train linking the two countries would allow more Brazilian soybeans to be transported by land to Peru and then on to China. Brazil has seen trade with the world's second-largest economy soar in recent years.

Peru's government is also pushing a potential $10 billion coastal rail project.

Most local officials and diplomats, however, strike a cautious tone. They say both China and the United States are key partners. But privately, they admit that China has paid more concrete attention to Latin America.

"Peru is open to doing business with all countries," said a senior Peruvian official on condition of anonymity. "What China is doing is concentrating its investments in Latin America and Africa," which have the resources it needs, he said.

Peru is expected to sign an agreement with China during APEC to update their 2009 free trade agreement, mainly related to intellectual property, e-commerce and customs procedures.

PRAGMATISM

The Brazilian ambassador in Lima, Clemente Baena Soares, confirmed that the Chancay megaport would be a great boost for producers in his country, reducing travel times to Asia by almost half. "Soybeans would benefit the most, as would other agricultural products, including semi-industrialized ones."

The diplomat asked Peru to ease bureaucratic procedures for Brazilian transporters, such as load limits on the highways that link the countries.

Daniel Parodi, a political analyst and historian at the Pontifical Catholic University of Peru, said that, in the face of the Chinese incursion, a Latin American alliance for its economic development could be the key to starting a new stage in the production of manufacturing and technology, which would reposition the region in the world as an important commercial block.

"The geopolitical effects of Chancay will depend on the policies that Peru and the region adopt in the face of this enormous challenge. The question is whether the states have reflected together on the role that they, as Latin America or part of it, want to play in the 21st century," he said.

The president of the Peru-China Chamber of Commerce, José Tam, said that the latest Chinese investment in Chancay could generate the beginning of a new cycle of related projects, because the Asian country has proven to be "quite pragmatic."

"China is sending the clearest signals of enthusiasm in the region, and the issue is simple ... our geographic location has always been very important," said Tam, who heads the union that includes major copper mines such as MMG Ltd's Las Bambas and Aluminum Corp's Chinalco.

Mario de las Casas, corporate affairs manager for Cosco Shipping, said China's pivot was not political and that Peru is open to investors from all over. With less U.S. investment on offer, the decision is purely commercial.

"The United States should come and invest, it hasn't done so for many years," he said, adding that Peru is well positioned to benefit from any global trade tension. "There are no good guys or bad guys here, there are just interests," he said.

Autores

Reuters