On November 14, 2024, marks the beginning of a new era for China’s global ambitions. Chinese President Xi Jinping and Peruvian President Dina Boluarte inaugurated the Chancay Port, a pivotal milestone in the expansion of China’s Belt and Road Initiative, strategically located near the United States’ sphere of influence. This $3.5 billion project was initiated in 2019 through a partnership between COSCO Shipping Corporation (holding a 60% share) and Peru’s Volcan Mining Company (holding a 40% share). The completion of the first phase in late 2024 has endowed the port with a capacity of 18,000 TEUs and is projected to generate $4.5 billion annually while creating 8,000 jobs. Additionally, the port is expected to reduce shipping times between Latin America and Asia from 35 to 23 days, significantly enhancing trade efficiency.
Peruvian View:
The Chinese BRI has been labeled a “debt trap” due to the famous incident of the Hambantota Port project in Sri Lanka. The Peruvian people have expressed skepticism about the long-term impact of Chinese involvement in the country. Furthermore, President Dina Boluarte publicly acknowledged the risks of the project and stated:
“We are actively engaged in re-evaluating our joint agreements to champion Peru’s national interests.”
She assured that loans and investments from China are negotiated on favorable terms, focusing on mutual benefits rather than one-sided interests. The government has emphasized the port’s potential to create jobs, enhance trade efficiency, and boost GDP growth.
Chinese View:
Chinese President Xi Jinping has positioned the Chancay Port as a flagship project within the Belt and Road Initiative, enhancing trade between Latin America and Asia, especially with China. In his inauguration speech, Xi stated that
“Chancay Port marks the inception of a new land-sea corridor, reshaping global trade routes and fostering economic synergy.”
With Peru’s Volcan Mining Company involved, this strategic asset helps expedite China’s access to vital raw materials like copper, gold, zinc, silver, and lead. Copper and lead are highly valuable for China, as they are the largest producers of electronics (which require high copper content) and electric vehicles (which require lead for batteries). Gold and silver are also important assets; gold can be used as a hedge against economic risks, such as potential U.S. sanctions. Lastly, zinc is used in galvanizing steel, a sector where China has a dominant position.
USA Response:
This has sparked concerns among U.S. policymakers and top diplomats in Latin America about China’s expanding influence in the region as a threat to U.S. sovereignty. Brian Nichols, U.S. Assistant Secretary of State for Western Hemisphere Affairs, expressed concerns about Chinese investments, pointing to the Sri Lanka case, and stressed that nations must act with vigilance to protect their long-term interests. In order to counter Chinese investments, the U.S. proposed an expansive master plan for the Port of Matarani, which was approved by Peruvian officials in October with an investment of $500 million. On November 1st, the U.S. Port of Hueneme in California and the Peruvian port of Paita were inaugurated as part of a new U.S. Sister Ports program to exchange best practices in safety and security, smart port technology, sustainability, and green shipping corridors. However, these efforts are still far behind what China has achieved.
In conclusion, the United States is attempting to curb China’s expansion in Latin America but is lagging behind. As Donald Trump is set to return to power on January 20, 2025, he plans to implement policies to “Make America Great Again,” including raising tariffs on certain countries. If the U.S. imposes tariffs on Peru, it could harm the trade of coffee beans, potentially opening the door for China to step in. The most concerning issue globally is the involvement of Volcan Mining in the Chancay port project, as both India and South Korea rely on Peru for copper exports. South Korea, a competitor to China in electronics, and India, a growing rival, could face challenges if China gains influence over copper exports, as copper is a critical raw material for electronics. This situation could give China an unfair advantage in restricting copper exports to South Korea, impacting global trade dynamics.
