Chancay is the first deepwater port in Latin America over which Cosco will have full operational control. As with other Chinese state-owned giants, the shipping company is under the long shadow of the Chinese government.

By Juan Pablo Cardenal

Coinciding with APEC’s annual meeting on early November in Peru, Chinese President Xi Jinping plans to inaugurate the Chancay multipurpose port, the most strategic of the infrastructures that China has built in Latin America, 75 kilometers north of Lima. A pharaonic work of 3.6 billion dollars whose main investor is Cosco, the shipping company that lies at the core of China's key state-owned companies. The expectations behind the project are in line with the magnitude of the investment.

It's born, therefore, with the spirit of becoming the logistics hub in the South Pacific. Its promoters point out that, in addition to creating thousands of jobs, the mega-port aspires to capture half of the maritime trade between China and South America by reducing the transit time of the route by 10 days. And they add that faster access to Asian markets will give Peru “a strategic international positioning”, which will serve as a trigger for the Peruvian economy and open up extraordinary possibilities for the country's development.

Although the economic benefit of the project is indisputable, perhaps it is not appropriate to set the bar so high. There is no shortage of Chinese flagship projects around the world that were problematic and saw their expectations frustrated. The best example in Latin America is the Coca Codo Sinclair dam in Ecuador. But in the midst of this message of optimism, it is striking that a crucial aspect of Chancay, such as its potential dual use and the geopolitical risk that derives from it, has gone largely unnoticed.

No one doubts that the medium-term use of the port will be strictly commercial. But, because of the nature and scale of a deep-water port infrastructure, it could later become a naval base providing logistical support and enabling the repair, resupply and stopover of warships. This is important in the context of the growing rivalry between China and the United States (Peru's two main trading partners), in which a warlike confrontation between the two in the Pacific over Taiwan is by no means out of the question. It is puzzling that such a relevant issue has been absent from the public debate.

Above all, because the logic behind this concern is clear. Chancay is the first deepwater port in Latin America over which Cosco will have full operational control. As with other Chinese state-owned giants, the shipping company is under the long shadow of the Chinese government. It must be assumed, therefore, that its leeway for autonomous action is limited. And that it will accede to any request from Beijing to assist in any kind of mission.

Cosco has participated in the past in joint exercises and has supported Chinese Navy operations. In addition, it is subject to strict control. It is required by law to include a Communist Party (CCP) committee in its corporate structure and to cooperate in information gathering and national defense mobilization. In a speech in 2023, Xi Jinping even urged private companies to serve the country's military and strategic objectives.

Control of the seas is key to China's economic and military expansion. Currently, a hundred ports in 64 countries are participated by China. Apart from its naval base in Djibouti, at least four others - operational, under construction, or in planning - would be dual-use. Chancay could be the next.

The question is this: would Lima have the political will and the strength to deny China the military use of Chancay? To answer, let us look at the main data of the bilateral relationship: China is the first player in the strategic Peruvian mining sector; Peru exports to that country 20,674 million dollars a year (data from 2022); China invested 6.5 billion in two Peruvian electrical acquisitions since 2020; and another 3.6 bllion in Chancay. Data that shows Peru's economic dependence. And that explains the wide consensus in favor of China that exists in the country.

In addition, we already have evidence of how things may go. Months ago, controversy was generated by the news that, in 2021, Peru granted Cosco exclusivity in the port for 30 years. This means that it will be the only company authorized to provide essential commercial services. According to the press, this concession was granted after an “administrative error”, since the authority that granted it did so outside the current legal framework and without having the authority to do so. While Peruvian actors seeking to override this act, Cosco threatened “to withdraw from the project and appeal to international arbitration”. In June, the law was amended to provide a legal framework for the exclusive rights granted irregularly.

This leads to a reflection for all of Latin America. It is true that Beijing pressures and exploits the institutional vulnerabilities of the countries where it invests. It does so to defend its interests and achieve its objectives. But as it seems clear in the Peruvian case, it is often the recipient countries themselves, their governments and their elites, who decide that China must be rolled out with the red carpet. It is obvious that China has understood our weaknesess. But we should know that this policy of appeasement makes us more vulnerable.

Juan Pablo Cardenal

Synic Analysis Editor

Writer, journalist. Foreign correspondent in China for various Spanish newspapers between 2003 and 2014, focusing on China’s international expansion since 2009. Since then, he has done research on the consequences of China’s investments, infrastructure and loans in 40 different countries from 4 continents. The research resulted in books he co-authored, among them “La silenciosa conquista China” (2011) and “La imparable conquista de China” (2015), which were translated to 12 languages. Since 2016, he has directed research projects oriented to understanding China’s soft power and Beijing’s strategy to achieve political influence in Latin America. He has been a speaker in various international conferences and has published articles in El País, El Mundo, Clarín, The New York Times, Project Syndicate and the South China Morning Post. His last book is “La telaraña” (2020), on the internacional thread of political crisis in Catalunia.