The port of Chancay in Peru: Reason for a new War of the Pacific?

The port of Chancay in Peru: Reason for a new War of the Pacific?

The authorship of the project to build a large port on the country’s coast is attributed to Peruvian admiral Juan Ribaudo. To do that, he took on the task of looking for the most suitable site and chose a piece of land in the small fishing port of Chancay located 70 km north of Lima. In 2011, the Volcan group also became interested in it, creating the company Terminales Portuarios Chancay which, upon Ribaudo’s death, acquired 100% of the company. From then on, Volcan focused on looking for a strategic partner and in 2019 made an alliance with the Chinese state company Cosco Shipping, which obtained a 60% stake for US$225 million. The conglomerate appointed another admiral, Carlos Tejada Mera as deputy general manager of the project and Vice Admiral Gonzalo Ríos Polastri as the company’s operations manager.

This alliance, established by Chinese and Peruvian capital with the Navy of that country, has been key to guaranteeing the stability of the process. Although the Peruvian naval force is absolutely a brother of the United States, the sailors have had no problem establishing a high-level agreement with the Chinese company. It is part of the pragmatism and de-ideologization of international politics after the end of the Cold War. For China, it has meant protecting the project from attacks that could come from the most recalcitrantly pro-American sectors of Peruvian society.

China’s first port investment in Latin America

Chancay is China’s first port investment in Latin America, which will be operated directly by its own company. For Peru, it means the possibility of relieving Callao, the country’s main port, handling cargo coming from the north, the south and the mountains. This mega port will become the main gateway from China and Asia to South America and will function as a hub for trade to and from Ecuador, Chile and Colombia. Likewise, the possibility of connection with the various bi-oceanic corridor projects could more easily communicate the American countries of the South Atlantic with the Pacific, generating an ­undeniable local, national and regional geopolitical impact. For example, Chancay could integrate Peru with the Manaus industrial park, which allows it ­to improve its connectivity to everything with Mercosur.

The expected investment of 3 billion dollars will allow the foundation of a project that will integrate two complexes, one port and the other a logistics facility, which will have two specialized terminals, four berthing sources and a container terminal with 11 docks ­for the care of transport ships of vehicles, general and bulk cargo. Upon completion of the work, it is expected that Chancay will be able to move a figure slightly higher than 5 million TEUs (twenty-foot equivalent container units).

At this moment, the port is ­in its first stage of construction. According to the plan, by the end of 2024, ­enough sites will be available to move one million TEUs and 6 million tons of bulk cargo. A first general cargo dock is expected to ­be operational this year, while the three remaining docking fronts (bulk cargo, vehicles ­and two container docks) would be enabled to serve state-of-the-art container ships 400 meters long for the first quarter of next year. This first stage considers an investment of 1.3 billion dollars.

The port of Chancay will provide facilities for the movement of cargo to run smoothly, through a road interchange, a service center for trucks,an administrative building, ­service buildings, a container area, a customs area, offices for the maritime police and agricultural-livestock service.

In a later stage, a modern logistics complex will be built that can respond to all the needs that arise from the operation of a port of this size, providing facilities for port operators to transport cargo safely and quickly. From the security point of view, it will have dependencies that respond to this type of requirement in port and phytosanitary matters, even anticipating transnational threats from organized crime, especially considering that a port of this magnitude will attract investments and with them, trade and a large real estate growth in the areas of housing and services, which will result in its transformation as a fundamental development point for the Peruvian economy.

The port’s function in the continental logistics and trade

In turn, the municipality of Huaral, where the port is located, will become an area of exchange and interconnection with all of South America. Due to the planned cargo capacity, Chancay will receive deep-draft vessels, moving to the most important Chilean ports ­, such as Antofagasta, Iquique or San Antonio, Ecuadorian ports such as Guayaquil and Colombian ports such as Buenaventura, as well as Callao in Peru itself.

The strategic location and the quality of the service that it will offer will lead to Chancay becoming a preponderant port for shipping lines, which from there, in the immediate future, will market or reship the cargo to Chile, Colombia and Ecuador, to expand later the exchange with other countries in the region.

For Peru, the possibility of having a port that solves the transportation problems that plague Callao due to its location in the metropolitan area of Lima, will be of the greatest importance. It should be considered that the port of Callao concentrates 86.4% of the country­’s port activity and the congestion generated by the lack of expeditious and safe routes to remove cargo makes the alternative of the port of Chancay more attractive.

Curiously, the main opposition to the port has not incubated in Peru. Although there are minority groups (probably paid for by the United States embassy), in general the country’s public opinion views the construction of this great work favorably. The main pressure factors against the project besides the United States come from the interests of Chilean business groups. This could mean anything from stopping construction to suing an international arbitration tribunal.

US concerns

The influence of the United States is based on an article published last August in the Washington Post (WP), which states that the government of that country has communicated to the Peruvian government its concern about Chinese investment in a strategic sector such as port. The discontent of the United States over the Chinese advance in Latin America is manifested in multiple ways, but of particular concern is what is happening in Brazil and Peru, which are the main destinations for Chinese investment in the region.

Given the fact that the Biden government has not expressed any opinion on what was mentioned in the WP article, the source affirms that the assertion seems to be an attempt to generate an opinion matrix from Peru at a time when the electricity company China Southern Power Grid International had closed a purchase agreement for Enel Distribución Perú, the country’s main energy distribution company, and that there was a process in progress for prior approval of the operation at the National Institute for the Defense of Competition and Protection of Trade. Intellectual Property (Indecopi).

It has been from Chile where the main questions have arisen about the construction of the port of Chancay, especially because it will be able to receive post-Panamax ships that do not have fluid operational possibilities in other ports in the region, particularly in Chile. On the other hand, it is evident that Chilean ports will be affected in their loading capacity and interconnection with the Atlantic, especially if it is considered that Chilean ports have – until now – predominance as the arrival/departure point of the bi-oceanic corridor that links Brazil with Chile and passes through Paraguay and Argentina.

Chilean opposition to the project

For this reason, Chilean capital is operating strongly to prevent the commissioning of the port of Chancay. Chile is worried by certain facts, with two of them particularly: Firstly, the sea route from China to Chancay will reduce the journey to the southern coast of South America by 15 days. Secondly, due to the draft, Chancay will be able to receive ships with the maximum transport capacity, the so-called Ultra Large Container (ULC), which can transport up to 18,000 TEU. Under these conditions, Chilean ports will only be able to receive smaller vessels that would come from a cargo transshipment from Chancay.

The Peruvian political analyst Luis Thais, closely following these matters in a very well-informed way, has said that the characteristics of Chancay will allow decreasing transportation costs by around 30%, which means that Peru will be much more competitive than other countries in the region. In particular, this will affect Chile, which will no longer be competitive in its trade with Asia. Given this situation, the Chilean business group Luksic, the largest in that country, which has various port and mining interests, considers that Peru is acting against competition rules, because of granting the possibility of operating all the services to a Chinese company.

In Chile this issue has been discussed for 12 years, but when tenders have been made for the construction of ports, the Luksic group has not participated. It has been the Chinese companies that have won such tenders, so Luksic should not refute the realization of a project that has been carried out in terms of law. As Thais explains, this happens because Luksic has just purchased a fleet of boats in Holland and is the owner of the two largest fleets of boats in Chile.

Very strangely, this situation caused the president of the Peruvian Ports Association (a retired admiral) to say that there were documents that were not in order. This happened last month when the project has been approved since 2021 and received already an investment of more than 1.2 billion dollars. This admiral told the Attorney General of the Ministry of Transportation and Communications that it must make a request to the justice system to rule on whether it is in accordance with the law to grant a company exclusivity over the provision of port services.

Evidently, a strange fact is manifested that reveals corruption, since what was previously stated was not carried out in accordance with natural procedures. In the first instance, because the admiral, to make this request, should have consulted the minister of transportation and communications, which did not happen.

In this context, the announcement by Foreign Minister Javier González-Olaechea drew attention, assuring that the works are progressing as scheduled and that they are waiting for official information from China about the visit of President Xi Jinping at the end of the year when the first stage from the port of Chancay would be inaugurated. The announcement says the visit was “unofficially confirmed” verbally by a Chinese vice foreign minister.

Xi visit to Peru and Peruvian domestic controversies

Despite this announcement, the conflict regarding to the exclusivity of essential services in the port of Chancay is not resolved. The Peruvian Foreign Ministry hopes that there will be a solution to the problem with adequate legislation approved in the Congress of the Republic. They are confident becauseprogress in the construction of the Chancay Terminal is going according to schedule, despite the controversy generated regarding the essential services of this port.

To resolve the controversy, the President of the National Port Authority, Walter Tapia, presented his resignation after the lawsuit filed against Cosco to annul its exclusivity in the port of Chancay in a decision that left many doubts from the from a legal and even ethical point of view. With this decision, the controversy is apparently resolved so that the port construction can continue and that is what motivated the security of the Foreign Ministry, when making the announcement of the visit of President Xi Jinping who, in Peru, had been doubted. The truth is that this whole situation is causing a lot of commotion in the country because it is giving rise to the circulation of multiple conspiracy theories and uncertainty about what may happen.

In general, in Lima, the idea is much stronger that the resistance to the port of Chancay comes from the intervention of Chilean businessmen, and that is much more logical although there is still no explicit evidence. Let’s hope it doesn’t lead to a new “War of the Pacific”. It was commercial and mining interests that encouraged a fratricidal war in the first instance. (War between Chile on one side and a Peruvian-Bolivian alliance on the other, taking place 1879 – 1884. Also known as the “Nitrate War”, the conflict erupted over the extraction and taxation of nitrates, UWI.) Today, once again, Chilean businessmen express the Pinochet voracity that characterizes them.

Sergio Rodríguez Gelfenstein
Sergio Rodríguez Gelfenstein
A Venezuelan international relations expert, Gelfenstein was previously Director of the International Relations of the Presidency of the Bolivarian Republic of Venezuela, his country’s ambassador to Nicaragua and an advisor for international politics for TELESUR. He has written numerous books, among them “China in the XXI Century – the awakening of a giant”, published in several Latin American countries. You can follow him on Twitter: @sergioro0701

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May 2024