Washington is alarmed by China’s $3.6bn megaport for Peru

Chancay, a coastal town in Peru, was once only known for its pre-Hispanic Inca cultures.

Its size made it a popular tourist destination for residents of Lima, the capital city, located 50 miles south. They liked to visit the 19th century mock medieval castle. When President Xi’s cavalcade makes its arrival next month amid fanfare it will be the centre of a revolution in world order.

Chancay’s peace has been disturbed with the construction of the $3.6 billion megaport. It is the first port on South America’s Pacific coast large enough to accommodate the world’s largest container ships.

Peru wants to open a direct, fast route for its neighbours like Brazil as well as for Peru itself. This will reduce the need to transfer goods via Mexico or the United States. It also gives China control over the main trade route on the continent. China also hopes for the same. One of the main reasons why a state-owned company built and won exclusive rights for the port is because it was a big investment.

Peru hopes that the megaport would open a direct, fast route to Asia’s factories

In a note last year, Lieutenant Colonel Manolo Eduardo Villagra, an army strategist, wrote that “Peru would become China’s hub port in South America which would upset US interests.”

His conclusion? He said that Peru should begin strengthening its military force, since the country is suddenly a focal point for rival powers, after being torn by civil wars and political instability not so long ago.

Chancay, however, is not the largest investment from President Xi’s legacy project, Belt and Road Initiative. Under this initiative, Beijing finances infrastructure in middle-ranking and developing countries to bind them to China’s political and trade orbit. However, it has become one of the most controversial.

The project seemed to be a simple commercial venture, where a company that was 60 percent owned by Cosco, China’s largest state-owned shipping and port company, and 40% by Volcan, Peruvian mining firm, would construct a gateway into the Pacific. Peru and other Latin American countries would export minerals, food, such as soybeans, to China and Asia and import consumer products.

The Peruvian Government woke up too late to discover that Cosco had exclusive rights to operate the port under the contract. This was a violation of the policy that states that all ports should be managed by the government. Cosco tried to avoid the clause in this year’s contract, but the government eventually gave up.

Washington was alarmed. In times of crisis, such as war with the United States, all Chinese companies are legally bound, especially state-owned firms, to comply with Beijing’s demands for security and the People’s Liberation Army.

Theoretically, Chancay could become a Chinese base. “The PRC (People’s Republic of China) is playing the long game” with its development of sites and facilities that are dual-use throughout the region, General Laura Richardson of the US Southern Command told a Congress committee in this year. She was referring to Chancay.

The PRC portrays its investments as peaceful, but many are actually points of future multidomain access by the PLA as well as strategic naval chokepoints.

Washington is the only one to blame. Xi made repeated visits to Latin America during his 12 years at the helm, and Chinese companies invested heavily in mines which will be crucial for new technology. In Argentina, Bolivia, and Chile, they own stakes that are crucial to the production of lithium, which is used in batteries for mobile phones, cars, and other products. China controls all of the power companies in Peru’s capital city, which is home to about a third the population.

The poster shows the progress made in the construction of the building, which will be inaugurated next week

America, on the other hand, has shown very little interest. Biden is yet to travel to South America and Trump only spent three days in Argentina at a business meeting. American companies often follow their presidents, citing the political instability of the region, which China ignores.

The only bidders in this year’s auction were Chinese. Omar Narrea is an academic from the University of the Pacific in Lima. He said that the public opinion in Peru may want to criticise China on a political level. “But it is not only about politics. It’s also about economics.”

Richardson and other generals have warned the US to try to catch up.

Xi will inaugurate Chancay on the sidelines a summit of Asia-Pacific Economic Co-operation in Lima. Biden will also be attending. Both men will visit Brazil as they continue their battle for influence.

During his 12 years as President, Xi has visited Latin America several times.

China, however, is also winning this race. Brazil is one of the largest suppliers of soya bean, sugar, and other food to China. In 2009, China overtook America as its top trading partner. President Lula, through the Brics grouping of emerging economies, has developed close ties with Xi.

Both countries have recently drafted their own peace proposals for the Ukraine war. Rebecca Nadin is an expert at the Overseas Development Institute on China’s Belt and Road Initiative and China’s investment strategies.

There are challenges to Chancay’s success, including whether Brazil and other countries can overcome environmental and technical barriers for the new road and railway links that will truly make it profitable.

The United States is betting that Latin America’s voters will decide in the end to stay with their more friendly and liberated neighbour rather than China.

Beijing also plays down the idea of being a global rival to the US, with developments like Chancay. In an editorial published in the Global Times this week, the mouthpiece of the Communist Party, it was said that the port demonstrated there could be “synergy”, between American and Chinese investments in places like Peru, to the benefit for everyone.