The picture says more than a thousand words: Peru’s President, Dina Boluarte, clasps the right hand of her guest from Beijing, Xi Jinping, with both hands. The occasion for the warm-hearted welcome gesture last week was the opening of the deep-water port of Chancay, located around 80 km north of Lima, from which both sides expect enormous benefits. Much to the annoyance of the USA.
Yet U.S. or European companies could have built the port on their own initiative. For years, Peru courted investment to realize the project. Without success until Cosco knocked on Lima’s doors and opened its wallet. Since the sealing of the deal in 2021, the Chinese state-owned shipping company has invested US$ 3.56 billion in the project. The funds allow Cosco to control 60% of the port’s operating company and guarantee the exclusive use of the megaport for 30 years. From a Peruvian perspective, the deal pays off: Chancayis expected to generate US$ 4.5 billion in annual revenue and create over 8,000 jobs. Yet, there are risks lurking. The Chinese might base warships there to spread their military influence in the eastern Pacific, and the future Trump administration could impose high punitive tariffs on imports from China discharged in Chancay.
Constant growth expected
In the initial phase, one million TEU is expected to be handled annually, which is to be successively increased to 5 million steel boxes. The port will reduce the sailing time of Cosco vessels between Shanghai and Peru from 35 to 23 days. With a depth of up to 17.8 meters, it is the first deep-water port on the Latin American Pacific coast to be controlled by a Chinese state-owned company.
While at the global level, countries such as those of the European Union, Canada, and the United States, have been implementing measures to curb China’s advance, Beijing has consolidated its control over strategic sectors in the Andean country.
China is in control of Lima’s critical infrastructure
In FEB24, Peru approved the purchase of Enel Distribución Peru and Enel X Peru by state-owned China Southern Power Grid International (HK), thus ceding total control of electricity distribution in its capital city Lima, to Beijing. “China wants to be Latin America’s switch, and Peru has become the paradigm of that effort,” Peruvian political analyst and economic journalist, Paolo Benza told Reuters. Beijing’s regime is taking advantage of the gaps left by western companies, turning its state-owned conglomerates into “voracious buyers of consolidated assets,” he added. The direct investment in key sectors allows China to increase its influence in the region through which it can continue to expand its geopolitical power, Benza warned.
… and in a strong position in the mining industry
Beijing’s advance in Peru’s electricity sector complements its growing control of the country’s mining sector, the main engine of the Peruvian economy. According to Peru’s Ministry of Energy and Mines (Minem), Chinese companies produce around 25% of copper and 100% of iron ore, accounting for some 20.8% of total investment in mining. However, these investments have not generated equitable or sustainable development. “On the contrary, it has led Peru to depend on China and has exacerbated social tensions and environmental hiccups,” writes Diálogo Americas in an essay.
With China as the largest copper consumer, absorbing about 50% of world demand, and Peru as the second largest producer (2.6 million tons in 2023. In comparison, Chile produced 5 million tons) China’s state-backed conglomerates view the country as fertile ground on which to consolidate their influence. “Unlike other commercially driven companies, the objective of Chinese investors is not an immediate return, but the fulfilment of strategic goals, which allows them to act more aggressively in politically unstable countries like Peru,” warns Diálogo Americas.
Will the China-first policy pay off for Peru?
In this context, there are also plans to build a rail link across the Andes from Chancay harbor to Brazil, financed and operated by Chinese companies. The central aim is to increase the maritime transport of raw materials from South America’s hinterland to China with industrial and finished products flowing in the opposite direction afterwards. In the meantime, however, the alarm bells are getting louder in Latin America, warning against President Boluarte‘s cozy relationship with China. It will not bring Peruthe hoped-for economic upturn in the medium term, but will instead lead the country into a growing, neo-colonial dependency on Beijing, critical voices increasingly declare.
