Super port is expected to turn Peru into ‘Singapore in South America’

Peru is about to inaugurate Chancay deep-water port, a super project expected to promote economic development, turning this country into “Singapore in South America”.

The Chancay port project is located in the town of the same name, about 80 km north of the capital Lima and was built thanks to loans from China. This will be one of the rare ports on the Pacific coast of South America that can receive large cargo ships, thanks to a depth of nearly 18 m.

Chinese President Xi Jinping plans to join Peruvian President Dina Boluarte at the inauguration ceremony of Chancay port on November 14, when he comes to Lima to attend the Asia-Pacific Economic Cooperation (APEC) Summit Week. 2024.

“Everything is ready,” Gonzalo Rios, deputy general director of the Peru branch of Chinese port operator Cosco Shipping, which holds 60% of the port’s shares, told AFP. “With the inauguration of Chancay port, Peru can become the logistics gateway of South America.”

Peru also has Callao port located right next to Lima, but the water level is about 2 meters lower than Chancay.

 

“Super port” in Chancay town, Peru on October 29. Image: AFP

Peru began evaluating the feasibility of the Chancay port project in 2008, as it and other South American countries sought to promote economic development. Related studies all point to a problem: they lack funding to build such a mega infrastructure project.

“We invited several companies and governments around the world to join the project but no one was willing to spend the money,” said Juan Carlos Mathews Salazar, Peru’s former minister of trade and tourism.

China then decided to invest in building Chancay port, incorporating it into the Belt and Road Initiative (BRI) launched by Mr. Xi in 2013 to strengthen the connection of the world’s number two economy with Europe, Africa and the rest of Asia, expanding into South America.

After a three-year negotiation period, Chinese banks approved a loan of $3.5 billion to Peru to implement the port construction project. The project was started in 2019 in Chanchay, a fishing town with a population of about 50,000 people, facing the Pacific Ocean.

When put into operation, Chancay port is expected to help shorten the shipping time of goods from the region to Asia from 35 days to 25 days, significantly reducing logistics costs. Most cargo ships from Peru to Asia and Oceania currently need to go through Central America or North America.

Chancay Port will be the gateway to import electronics, textiles, consumer goods from Asia and export minerals from Peru and neighboring Chile. Peru and Chile are the world’s second largest exporters of copper and lithium, respectively.

The port initially could receive 1-1.5 million TEUs (standard containers about 6 m long) of bulk cargo per year, then increased to 3.5 million TEUs a year. Peru this year expanded the port of Callao, increasing its receiving capacity to 3.7 million TEUs a year, according to the Peruvian Ministry of Transport.

Chancay is estimated to bring annual economic benefits of 4.5 billion USD to Peru, equivalent to 1.8% of the country’s GDP, creating thousands of direct and indirect jobs. Peru is also implementing the construction of a railway and road network connecting Chancay port with major cities in the country, expected to connect with other countries in the region.

Brazilian Ambassador to Peru Clemente Baena Soares described the Chancay port as a strong boost for the country’s soybean farmers, helping to reduce shipping time to Asia by nearly half. Mr. Soares called on Peru to loosen restrictions on Brazilian carriers, such as increasing load limits on highways connecting the two countries.

 

Location of Chancay port, Peru. Graphics: FT

Li Xing, professor at the Guangdong Institute of International Strategy, Guangdong University of Foreign Studies and Foreign Trade, said China’s increased presence in South America will help balance Washington’s influence in the Asia-Pacific. , as well as eliminating the risks caused by a trade war if US President Donald Trump’s administration applies a tough policy towards China.

According to professor Li Xing, China did not choose to increase its presence in sensitive areas such as the military, but rather promoted economic relations with Peru.

The change is reflected in the trade balance between Peru and the US and China. Beijing has clearly outperformed Washington in trade relations with Lima since 2015, and the gap has continuously increased. According to the United Nations trade database (UN Comtrade), the gap in 2023 has reached 16.3 billion USD.

“China has entered the region forcefully, learned quickly and is prepared for the long term,” said former US State Department official Eric Farnsworth, now a researcher at AS/COA, an organization that promotes issues of education, economics, and society in the Americas, New York headquarters, said.

 

Workers work at the “super port” Chancay on October 29. Image: AFP

In May, the Peruvian parliament passed a bill allowing Cosco exclusive rights to exploit Chancay port. Amid some concerns about “sovereign rights” with this super port, Peru’s Minister of Transport and Communications Raul Perez Reyes affirmed that the country’s customs and port authorities are the ones supervising all port activities.

“This is a Chinese investment, but it is the same as investments from the UK or North America… and in no case do we lose our sovereign rights,” Mr. Reyes affirmed.

Minister Reyes believes Chancay will help the country’s emerging agricultural industry develop further, adding that the port will compete with Mexico’s Manzanillo port and even Long Beach in California, USA.

“Our goal is to become the Singapore of Latin America,” he declared.

By Editor

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