Friday, November 22

How the Chancay megaport that China opens in Peru can impact the economy of other Latin American countries

It will be the largest commercial port in South America.

For years, China has been building a large port in Peru, destined to become a reference for the entire region and revolutionize its trade with Asian markets.

The Chancay port complex, about 70 kilometers north of Lima, opens this Thursday with great expectations from the Peruvian and Chinese governments and the potentially benefited economic sectors.

This is a gigantic project led by Cosco Shipping Company, a Chinese state-owned company dedicated to maritime transportation, with a total planned investment of US$3.4 billion, to build a complex of 15 docks, offices, logistics services and a 2-kilometer-long tunnel. to discharge the load.

Eight years after the start of the works and coinciding with the visit of the Chinese president, Xi Jinping, to Lima this Thursday, the first phase of an infrastructure will be inaugurated, the construction of which has not been without controversy and whose effects will be felt beyond Peru. .

Why is it important

Getty Images: The port of Chancay will allow ships with greater draft and loading capacity to dock.

The port represents a significant step forward in the Chinese presence in Latin America.

Conceived within the framework of the strategic “Belt and Road Initiative” that it has been developing for years to increase its presence and influence in the world, with it China increases its capacity to unload its goods in South America and ship those it imports from this regionmainly minerals such as lithium and copper and agricultural products such as soybeans.

The Minister of Communication and Transportation of Peru, Raúl Pérez Reyes, said that the megaport will allow his country to position itself “as a logistics hub throughout Latin America.”

The Peruvian government estimates that the new terminal will generate 7,500 direct and indirect jobsalthough critics point out that elsewhere in Latin America Chinese investments have employed displaced workers from China more than local labor.

Questioned by environmental defenders and neighborhood organizations, the megaport promises some advantages in time and distribution costs that will make it especially attractive for logistics operators.

According to estimates by the Peruvian government, its location allows it to reduce to 28 the 40 days that cargo ships that transport goods by sea from Peru to Asia now take on average.

“Before, products that were exported from South America had to go north, to ports like Manzanillo, in Mexico, to be transshipped and sent to China,” Robert Evan Ellis, from the Institute for Strategic Studies, explains to BBC Mundo. of the United States Army.

“With Chancay a direct and faster route is opened. It is like a bus route that used to make all the stops and now only stops when it reaches the destination,” he adds.

Getty Images: The Peruvian government defends the advantages for its country of large Chinese investment, but several experts warn that a dependency is being created.

Added to that is that The deep draft of the Bay of Chancay gives the port the space to accommodate the largest ships in the world, capable of transporting up to 24,000 containers, known in the naval sector by the acronym TEU (Twenty-Foot Equivalent Unit), which will offer shipping companies the possibility of sending larger freight rates at a lower cost.

As Juan Ortiz, from the Economic Context Observatory of the Diego Portales University of Chile, told BBC Mundo, “Chancay will have operational advantages over the rest of the ports located on the Pacific Ocean in South America due to the high investment made in said port and the incorporation of cutting-edge technologies that will reduce costs and reduce operating times in the port compared to others in the region.”

The impact in Peru

The effects of big infrastructure have already been felt locally.

Chancay, a small town where people have traditionally dedicated themselves to artisanal fishing, is experiencing a great transformation.

Now a tunnel runs through it that connects the large port with the North Pan-American Highway, and the price of land there has skyrocketed.

“There is an expectation that companies dedicated to logistics will set up shop near the port,” Rubén Tang, founder of the Confucius Institute at the Pontifical Catholic University of Peru, told BBC Mundo.

AND The impact of the new infrastructure will transcend the limits of small Chancay.

The Ministry of Production estimates that the port and associated logistics centers will contribute some US$4.5 billion to the Peruvian economy, 1.8% of GDP, and the Central Bank estimates that only the initial phase that is now inaugurated will add 0.9 % of GDP already next year.

Getty Images: From Chancay, the route for American goods to Asia cuts its duration by several days.

The new port It should serve to alleviate that of El Callaothe main entry and exit point for goods in Peru, whose current saturation harms and slows down the commercial flow.

But there are also shadows and doubts around the project.

“In other investments in Latin America and Asia we have seen how China uses predatory techniques and in the end ends up taking natural resources and increasing dependence on the countries in which it settles,” says Evan Ellis from the United States.

“With Chancay, Peru is becoming more dependent on China“, he warns.

Environmental organizations have raised their voices about the threat to the natural environment and the exclusive concession of management of the port to Cosco has been appealed in court.

The other big unknown is how this vast transportation infrastructure will fit in a country that is characterized by the precariousness and insufficiency of its infrastructure.

According to Tang, “There is a pending gap so that the port can meet the expectations created and that is to improve connections with the provinces of Peru” where the mines and fields are where the raw materials consumed by China and the emerging Asian markets are produced.

Likewise, public services are pending development to serve a population that is already growing, one of the main reasons for complaint by local inhabitants regarding other large exploitations operated with Chinese capital in Peru, such as the Las Bambas mine, in the department of Apurimac.

Getty Images: China has a large presence in the Peruvian economy and a Chinese-owned company, MMG, operates one of the largest mines in the country.

The impact of the port of Chancay in Chile

Both the Chinese and Peruvian governments believe that the new port will contribute to increasing commercial exchanges in the Asia-Pacific area.

But different effects could be felt in each of the countries in the region that will only become clear over time.

In Chile, voices have emerged that have warned of the possible loss of competitiveness of its ports.

The former Chilean Minister of Transport and Telecommunications Germán Correa lamented in an opinion column published in Biobiochile that “Chile will be irrevocably left behind” for having allowed Peru to take the lead and “others will be the ones who will benefit from the tremendous development impact that it will bring.” the gigantic Peruvian port of Chancay.”

Projects such as the modernization of the Chilean port of San Antonio have been on hold for years due to the requirement of different environmental impact studies and the lack of a decision on financing and the role of the State, which has prevented Chile from acquiring the capacity to receive the larger vessels that will be able to dock in Chancay.

Getty Images: The emergence of Chancay could force Chilean ports like Valparaíso to reinvent themselves.

Economist Ortiz agrees that the start-up of Chancay “could reduce the demand for the use of Chilean ports both by local companies and by companies from other countries in the region, with those in San Antonio and Valparaíso, which process around 70%. of the national burden, as those mainly affected by greater competition.”

At a time when the drought that has affected the Panama Canal since last year makes navigation difficult and has diverted part of maritime traffic to the Strait of Magellan, Chilean ports have emerged as a formidable competitor.

But Ortiz points out that “lower transportation costs due to greater port competition or greater transportation options to external markets are positive for Chile’s trade flow.”

Andrés Bórquez, director of the Asian Studies program at the University of Chile, told BBC Mundo that “the impact will be mixed. Some ports may have to adopt a new role, but other sectors will benefit“.

“Chile sends 90% of its cherry production to China, mainly coinciding with the Chinese New Year, and for producers it will be an advantage to have a port like Chancay, which will allow the fruit to arrive there sooner.”

Bórquez believes that “Bolivia’s gas and minerals will continue to leave through Chilean ports and it is even possible that they will find in Chancay the collaboration they need to transship” and the cargo will leave from there for Asia.

Despite the competition that results for their logistics sector, Chilean exporters can be favored by the availability of a more expeditious outlet for their products to Asia.which should lead to a reduction in its logistics costs.

The impact of the port of Chancay for Brazil

Like Peru, Brazil is another country with increasingly closer commercial and political relations with China.

The Asian giant is Brazil’s main trading partner, whose government has shown interest in the Chancay megaport.

Getty Images: At first only four of the 15 breakwaters planned for the port of Chancay will operate.

Its Minister of Planning and Budget, Simone Tebet, visited him last March, according to the official Peruvian note, “to learn about Peru’s plans and strategies to promote South American integration routes.”

Leonino Dourado, from the Center for China and Asia Studies at the Universidad del Pacífico, in Lima, told BBC Mundo that “both governments and the company aim for Chancay to also become a hub for Brazilian exports.”

If achieved, it could have a great economic impact, since Brazil is the country with the highest volume of exchanges with China in the entire region.

But Dourado declares himself “skeptical” about that possibility.

“The distance from the producing regions of Brazil to Chancay is much greater than that which separates them from ports in the Atlantic such as Manaus, and they will continue to prefer that option because it has lower costs than land transportation to Peru.”

The expert recalls the example of the Interoceanic Highway, which connects Brazil with the Peruvian Pacific coast: “At the time it was presented as a way to facilitate Brazil’s trade with Asia and, after years in service, it has not had the expected effect. ”.

The question now is whether Chancay will have it, not only for Brazil, but for all of Latin America.

BBC:

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