China’s anger has faded. It arose after the Peruvian government withdrew its promise to grant the Chinese state-owned shipping company, Cosco, the exclusive rights to use a new deep-water port not far from Lima. The reason given to the investor: Exclusive operational rights for Chancay Puerto would hamper free competition and favor Cosco one-sidedly. Now Peru’s President, Dina Boluarte, made a political U-turn, again granting Cosco exclusivity, once the mega port is operational.
Ms. Boluarte’s behavior is reminiscent of King Henry IV’s supplication and penance to Pope Gregory VII in Canossa in 1077 A.D. As a result of a massive dispute, the pope had excommunicated the king from the church. So, Henry IV went to Italy and begged the pope to end the papal ban on him, which he did.
Beijing applauds
Today, Canossa is in China, more precisely in Beijing. That is where the Peruvian politician met ruler Xi Jinping on Friday (28JUN24), having previously visited Huawei’s industrial complex in Shenzhen. During the subsequent press conference, she announced that former legal and political objections have been dropped and Cosco would be granted exclusivity for the port as originally promised by her administration. As soon as her notification was out, Beijing applauded loudly.
Located about 75 km north of Peru’s capital, Lima, Chancay has been popular with tourists and the birds that migrate every year to and from North America. This has changed radically since construction work on the huge commercial port and adjoining industrial zone began.
Transforming trade flows
Once operational, the deep-water port is intended to be a gateway for China on the Pacific side of South America. It is expected to transform trade flows between the subcontinent and China by slashing travel times for container vessels.
“We’ve seen a number of acquisitions of ports by Chinese companies in the past, but this is the largest that I know of in the Latin American region,” Margaret Myers, Director of the Asia and Latin America Program at the Inter-American Dialogue, a think tank in Washington, DC, told the public radio station ‘The World’.
Benefitting China’s interests
She went on to say that the new mega port will become a key link between China and Latin America. “In the case of Peru, a lot of this trade would be in copper but also goods from a wide range of other countries, potentially including agricultural products from Brazil.” Myers reminded that the Belt and Road initiative is a tool to secure China’s energy and food supply.
The construction of Chancay Port is expected to cost USD 1.3 billion, mainly financed by Cosco and Chinese banks. The first container ship is scheduled to moor in November when Peru hosts the Asia-Pacific Economic Cooperation Leaders’ Summit. This is a fitting occasion for the official inauguration of Chancay Port. Observers expect that the project will increase the tensions between China and the USA.
Partnering with Huawei
This is also likely to apply to another decision by President Boluarte: The contract, signed in Shenzhen, granting Chinese telecom giant, Huawei, the right to train thousands of Peruvians in new communication technologies. The president’s office speaks of 20,000 young professionals and entrepreneurs from small and medium-sized enterprises, who will be trained in new technologies developed by Huawei, especially in AI.
Prior to departing for China, Ms. Boluarte told state-owned newspaper, China Daily, that her visit was “paving the way for greater investment and cooperation” with China in key sectors such as infrastructure development, digital transformation, artificial intelligence, clean energy, and people-to-people exchanges. According to Fudan University’s Green Finance and Development Center, the Latin American country was granted USD 2.9 billion in 2023 – the third highest total, worldwide. The decisions announced by Ms. Boluarte during her China trip can be explained against the backdrop of these financial ties – local critics speak of one-sided dependencies at Peru’s expense.
