Starting his trip to Latin America, Xi Jinping opens a huge port in Peru financed by China

Chinese President Xi Jinping launched a week-long diplomatic blitz in South America on Thursday by inaugurating a massive deep-water port in Peru, a $1.3 billion investment by Beijing as it seeks to increase trade and its influence on the continent.

As Chinese demand for agricultural products and metals from Latin America increases, Xi will attend the Asia-Pacific Economic Cooperation summit in Lima, then travel next week to the Group of 20 summit in Rio de Janeiro, where he will also make a state visit to Washington. Brazil.

Xi and Peruvian President Dina Boluarte participated via video link on Thursday in the opening of the port of Chancay, about 80 kilometers (48 miles) north of Lima on the Pacific Ocean, and signed an agreement to expand a of existing free trade.

Xi said Chancay, a deep-water port with 15 berths, was the successful start of a 21st century Maritime Silk Road and part of China's Belt and Road Initiative, its modern revival of the ancient Silk Road trade route.

China is willing to work with the Peruvian side to take the Chancay project as a starting point to forge a new sea-land corridor between China and Latin America and connect the Great Inca Trail, Xi said, referring to to a 15th century mountain network that came together. the Inca empire.

In an opinion piece in state newspaper El Peruano, Xi said the Chancay project would generate $4.5 billion in annual revenue, create more than 8,000 direct jobs and reduce logistics costs of the Peru route -China by 20 percent.

The Chinese-controlled megaport was built by Cosco Shipping Ports (1199.HK), opens in a new tab and received $1.3 billion in Chinese investment for its first phase. China is expected to spend billions more as Beijing and Lima work to position it as a major shipping hub between Asia and South America.

The first ship was expected to leave Chancay next week, carrying Peruvian fruit to China, said Mario Ocharan, Peru director of the Chancay Chamber of Commerce.

China's main motivation for developing the megaport, according to Ocharan, was access to neighboring Brazil, where a new rail line is planned to transport Brazilian exports such as soybeans and iron ore to the port.

The rail project is estimated to cost $3.5 billion, according to Mario de las Casas, director of corporate affairs at Cosco Shipping Chancay Peru.

Establishing this link is “crucial” to improve soybean transportation, as Brazil is the top seller of the product to China, he said.

Geopolitical and economic headwinds

The port inauguration comes as Beijing seeks to further exploit resource-rich Latin America amid trade tensions with Europe and concerns over future U.S. tariffs on Chinese exports. of the new Trump administration.

Hundreds of Chinese business executives accompanied Xi on the trip, including executives from companies heavily invested in Peru, such as Chinalco, owner of the Toromocho copper mine.

Robert Evan Ellis, professor of Latin America research at the US Army War College, said Chancay will make shipping between Latin America and China more efficient.

As the port can accommodate larger vessels, it will reduce the need for shippers to consolidate cargo containers at intermediate points, thereby reducing handling costs and times.

“Chancay illustrates how China seeks to secure secure access to resources and markets and its increasingly successful struggle to capture global added value,” Ellis said.

China's major investment in Chancay has raised alarms in Washington. Gen. Laura Richardson, former head of the U.S. Southern Command, warned earlier this month that Chancay could be used by the Chinese navy and for intelligence gathering.

U.S. concerns about Chancay reflect a broader, decades-long shift in a region that Washington has long considered its backyard. China has overtaken the United States to become the largest trading partner of countries like Peru.

China's Global Times newspaper wrote in an editorial Monday that the port was “by no means a tool of geopolitical competition,” calling U.S. accusations about potential military use of the port “slander.”

Chinese President Xi Jinping reviews the guard of honor alongside Peruvian President Dina Boluarte after arriving at the government palace on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Lima, Peru, on November 14, 2024.