Tag Archives: Peru

Peru’s Stance On Megaport Is a Test of China’s Influence

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“Now the National Port Authority is trying to rescind the exclusivity, claiming it made a mistake…The Chinese company, however, remains firm and even hints that it could withdraw if it does not obtain exclusive access.”

China’s megaport in Chancay, Peru, just north of Lima, is set to be inaugurated by Chinese President Xi Jinping later this year during the annual Asia-Pacific Economic Cooperation conference. One of the largest deep-water ports of its kind, Chancay represents one of China’s most ambitious projects in South America. Built by state-owned enterprise Cosco Shipping, Chancay is meant to catalyze the China’s food security and dominance over critical minerals, while cutting shipping times to Asia by around one week. However, according to Argentine media outlet Infobae, Peruvian officials have announced an “administrative error” permitting Cosco Shipping to both build and operate the port exclusively.[i] According to the article, Peruvian regulators have rejected Cosco’s exclusivity, declaring it incompatible with having built the port under domestic law.[ii] As per the second excerpted article from Infobae, Cosco has said it will initiate legal action against Peruvian regulators, insisting on its economic model of exclusivity. The fallout from the Port of Chancay legal wrangling is notable, and likely to have a lasting impact. China sees the moment as precedent-setting for other countries with Chinese state-owned enterprises controlling key infrastructure projects, while Peru finds itself in a major bind after years of burgeoning Chinese influence over strategic sectors in the country. If Cosco manages to win exclusive control of Chancay, China will further solidify its control over strategic infrastructure in the Western Hemisphere; if Peru manages to safeguard its autonomy, it may furnish a blueprint for other regional powers willing to test the limits of China’s infrastructure ownership models.

Sources:

Source: “El ‘error administrativo’ que pone en jaque al Perú: dio el control total a China del Megapuerto de Chancay (The ‘administrative error’ that puts Peru in check: it gave China full control of the Chancay Megaport),” Infobae (an Argentine outlet with excellent regional coverage), 14 May 2024. https://www.infobae.com/peru/2024/05/14/el-error-administrativo-que-pone-en-jaque-al-peru-dio-el-control-total-a-china-del-megapuerto-de-chancay/  

With a projected investment of more than three billion, China is now bringing out its true intentions and at the same time taking advantage of an ‘administrative error’ on the part of Peruvian officials by granting operational exclusivity to Cosco, which has put the project in check…a situation that the National Port Authority of Peru is currently trying to solve…The Peruvian government assumed that the Chinese shipping giant would simply use the port of which it will be the majority owner and would not have exclusive rights over it. But during the negotiations, Cosco somehow obtained precisely these rights. Now the National Port Authority is trying to rescind the exclusivity, claiming it made a mistake…The Chinese company, however, remains firm and even hints that it could withdraw if it does not obtain exclusive access.

Source: “Megapuerto de Chancay: Cosco Shipping no da su brazo a torcer y anuncia sus acciones legales por conflicto con el Estado peruano (Chancay Megaport: Cosco Shipping does not give in and announces its legal actions due to conflict with the Peruvian State),” Infobae (an Argentine outlet with excellent regional coverage), 8 May 2024. https://www.infobae.com/peru/2024/05/07/megapuerto-de-chancay-consorcio-chino-no-dara-su-brazo-a-torcer-y-anuncia-sus-acciones-legales-por-conflicto-con-el-estado-peruano/  Through a statement, the Chinese consortium Cosco Shipping Ports Chancay Peru SA, in charge of the megaproject, recognized that the port infrastructure work in the country has been ‘seriously harmed’ by a change in the regulatory scheme…the company reported that they have found it necessary to initiate legal actions to defend its operating model and ensure its classification as private infrastructure, despite the public benefits it offers.

Notes:

[i] At an earlier period, U.S. officials warned Peru about China exerting control and exclusivity over Chancay. See: Michael Stott and Joe Daniels, “U.S. Raises Concern with Peru over Chinese Control of Infrastructure,” Financial Times, 3 October 2023. https://www.ft.com/content/2c77be69-60d7-4d5c-a0c6-c7978bde3888

[ii] According to noted analyst Elisabeth Braw, this situation is likely the result of Peru failing to read the fine print of the agreement. See: Elisabeth Braw, “Peru Learns to Read the Fine Print in China Deals,” Foreign Policy, 13 May 2024. https://foreignpolicy.com/2024/05/13/peru-learns-to-read-the-fine-print-in-china-deals/

China Nears Completion of Large Port in Peru With Dual-Use Capabilities

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A worker stands in front of a map depicting the massive Port of Chancay in Peru.

“Cosco Shipping seeks to improve China’s access to minerals from the mountains to the coast, and from there execute shipments through the port of Chancay.”

Weeks after the tenth anniversary of its Belt and Road Initiative (BRI), China is on schedule to inaugurate one of its biggest port development projects to date: the $3 billion Port of Chancay, just north of Lima, Peru. In recent years, Chinese-owned and operated deep-water ports around the world have captured the attention of many analysts for their dual-use potential, for both commercial and military purposes.[i] In the past, China has used its owned and operated ports as logistical points and ports of call for the People’s Liberation Army Navy (PLAN).[ii] Chinese-owned and operated ports also offer the potential for China to track data on trade flows, which could open the door to economic coercion against the host countries as well as other third-party countries.

In response to rising questions about the Port of Chancay project, Peruvian media conglomerate RPP reports the Peruvian government maintains that the port is purely economic in nature and that the local population will be compensated for displacement and any environmental damage to the surrounding areas. The second excerpted article in the Peruvian energy and mining-focused news outlet Energiminas, says that the port will play an important role in helping China to solidify its dominant position in Latin America’s critical minerals supply chains.[iii] Peru also maintains that the port, built by Chinese state-owned enterprise Cosco Shipping, will save an average of 10 to 12 days on goods traveling to Asia from Latin America. Further, the Peruvian government has confirmed its commitment to the project and stated its goal is to leverage its role as host of the Asia-Pacific Economic Cooperation in 2024 to officially inaugurate the Port of Chancay. China has dozens of contracts to upgrade, build, and/or operate deep-water ports in the Western Hemisphere, an economic reality with implications for the region’s operational environment. Given China’s past use of deep-water ports for naval port calls, the Western Hemisphere may soon witness an uptick in the PLAN presence.

Sources:

“Puerto de Chancay estaría listo para iniciar funcionamiento a fines de noviembre de 2024 (Port of Chancay would be ready to start operations at the end of November 2024),” RPP (Peruvian radio, television, and print media company located in Lima), 23 October 2023. https://rpp.pe/economia/economia/puerto-de-chancay-estaria-listo-para-iniciar-funcionamiento-a-fines-de-noviembre-del-2024-noticia-1512135?ref=rpp

The port of Chancay would finally be inaugurated in November 2024 with cutting-edge technology…‘we hope to finish the port at the end of November 2024 and inaugurate it on that date taking advantage of the APEC Summit’…‘We have more than 3,000 families registered with a baseline of the conditions of their house and with a commitment letter from Cosco, responsible for solving any environmental damage,’ said an official with the company.

“Puerto de Chancay evalúa mejoras en acceso de inerals de sierra de Oyón a la costa, señala Gobierno Regional de Lima (Port of Chancay evaluates improvements in access of minerals from the Sierra de Oyón to the coast, says Regional Government of Lima),” Energiminas (Peruvian news outlet focused on the country’s energy and mining sectors) 18 October 2023. https://energiminas.com/puerto-de-chancay-evalua-mejoras-en-acceso-de-minerales-de-sierra-de-oyon-a-la-costa-senala-gobierno-regional-de-lima/

The Regional Government of Lima indicated that the operator Cosco Shipping seeks to improve China’s access to minerals from the mountains to the coast, and from there execute shipments through the port of Chancay…For the Peruvian Ministry of Transport and Communications, this megaproject, led by the Chinese company Cosco Shipping, is key for international trade and will be a hub that will redistribute cargo from the countries of Chile, Ecuador and Colombia as well.

Notes:

[i] For a useful dashboard of Chinese-owned and operated ports around the world, see: “Tracking China’s Control of Overseas Ports,” Council on Foreign Relations, 6 November 2023. https://www.cfr.org/tracker/china-overseas-ports

[ii] Researchers tracking Chinese port calls have found that the PLA Navy has called at about one-third of the nearly 100 Chinese owned and operated ports overseas. See: Jennifer Rice and Erik Robb, “The Origins of Near Seas Defense and Far Seas Protection,” CMSI China Maritime Report, no. 13 (February 2021).

[iii] For more information on China’s role in Latin America’s minerals exploration and production, see: Ryan C. Berg, “China Deepening Cooperation in Latin America’s Sizeable Lithium Sector,” OE Watch, 01-2023. https://community.apan.org/wg/tradoc-g2/fmso/m/oe-watch-articles-2-singular-format/434262

Image Information:

Image: A worker stands in front of a map depicting the massive Port of Chancay in Peru.
Source : https ://commons.wikimedia.org/wiki/File :Puerto_Chancay_2.jpg
Attribution: Wikimedia, CC BY-SA 4.0 DEED

Peruvian President Castillo Oversees Dizzying Turnover in Government

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The swearing-in of Peruvian President Pedro Castillo.

The swearing-in of Peruvian President Pedro Castillo.

“Castillo also recalled the political instability that Peru has experienced in the last five years, where there have been up to four presidents and a dissolved Congress.”

Peru’s President, Pedro Castillo, has had trouble retaining ministers.  Castillo announced yet another new cabinet—the fourth in his six-month tenure, according to Spanish-language CNN en Español.  Such rapid cabinet turnover has contributed to a sense of chaos engulfing the country and mounting questions over the president’s ability to survive the rest of his term.  Castillo’s approval ratings have fallen steadily since his inauguration.  Shortly after swearing in the new cabinet, the Spanish-language version of the popular British outlet BBC en Español, began reporting on scandals in the personal lives of newly appointed ministers.  The outlet reports that the hoped for centrist cabinet did not materialize; rather, most of Castillo’s chosen ministers are loyalists and Marxists from his Free Peru Party.  In recent years, Peru’s political climate has been highly volatile.  Presidents have rarely finished their terms.  In 2020, the country had three presidents in just one week.  Peru’s constitution pits the Congress against the President, with the Congress capable of impeaching the president for the vague and ill-defined idea of “moral incapacity.”  Peru’s political instability has the potential to spill over into international supply chains: the country is the second largest producer of copper in the world, and the sector has seen recent strikes at mining sites connected to the political environment.

Source:

“Pedro Castillo anuncia que nombrará a nuevo gabinete, su cuarto en seis meses (Pedro Castillo announces that he will appoint a new cabinet, his fourth in six months),” CNN en Español (Spanish-language version of the popular U.S. outlet), 4 February 2022.  https://cnnespanol.cnn.com/2022/02/04/pedro-castillo-el-presidente-de-peru-anuncia-que-nombrara-a-nuevo-gabinete-su-cuarto-en-seis-meses-orix/   

Castillo will appoint a new president of the Council of Ministers, who, in turn, will appoint new heads of ministries.  It will be the fourth cabinet in just six months of government…Castillo also recalled the political instability that Peru has experienced in the last five years, where there have been up to four presidents and a dissolved Congress, and said that citizens, especially the poorest “do not want to see more confrontations, nor obstructionist and anti-democratic behavior, nor vacancy announcements, announcements of the closing of Congress.”

Source:  “Pedro Castillo nombra su cuarto gabinete en 6 meses, ¿por qué no consigue estabilizar a Perú? (Pedro Castillo appoints his fourth cabinet in 6 months, why can’t he stabilize Peru?),” BBC en Español (Spanish-language version of the popular British outlet), 5 February 2022.  https://www.bbc.com/mundo/noticias-america-latina-60269518

The last government of Peru lasted just over 72 hours.  The ministerial cabinet that was sworn in by President Pedro Castillo on Tuesday, the fourth government in six months, is expected to last a little longer…The truth is that the short life of Castillo’s cabinets has exposed the instability that has characterized his presidency.  Since he came to power against all odds, Castillo has alternated executives of diverse orientation, which has led his critics to accuse him of leading the country in an erratic direction, and several of his ministers had to resign in the midst of the scandal and challenged in Congress.

Image Information:

Image caption:  The swearing-in of Peruvian President Pedro Castillo.
Source:  Flickr, https://www.flickr.com/photos/presidenciaperu/51340618647
Attribution: CC BY-NC-SA 2.0