China’s Mega Port Frees South America from Fearing U.S. Threats

On November 14th, the Chancay Port, a joint venture between China and Peru, officially opened for business as planned, signaling the end of the American imperialists’ notion that “Latin America is America’s backyard.” This is because the Chancay Port holds immense economic and political significance for Peru and Latin America. The completion of this mega port means that South America has the potential to completely get rid of US economic sanctions and the ability to overcome US political interference.

Economically, the opening of the Chancay Port has led to a substantial reduction in both time and costs associated with transporting goods from Latin America to Asia.

Before this development, South America lacked convenient deep-water ports along its Pacific coast, forcing goods from countries like Brazil, Colombia, and Peru bound for China to pass through the Panama Canal. However, the Panama Canal, with its limited capacity of only 32 cargo ships per day on average, saw a significant portion of its traffic occupied by American and European companies, severely constraining South America’s exports. Moreover, the canal imposed insurance fees ranging from $60,000 to $200,000 per ship, significantly driving up export costs.

In contrast, the Chancay Port’s direct access to the expansive Pacific Ocean has slashed the sea freight time from Peru to China from 35 days to a mere 23 days. Boasting 4 berths and an annual throughput capacity of 1.5 million TEUs, based on the most common cargo ship ‘Panamax’, the port can accommodate an additional 300 fully loaded cargo ships headed for China annually. This means an average daily export of over 40,000 tons of goods to China.

With a depth of 17.8 meters, the Chancay Port can host ultra-large container ships carrying 18,000 TEUs, establishing itself as a vital transport hub and logistics centre along South America’s Pacific coast. According to reports from Chinese official media, this development is expected to save Peru over 20% in logistics costs, generate more than $4.5 billion in annual revenue, and create over 8,000 job opportunities.

This huge business opportunity is not solely enjoyed by Peru, as China has also built a complementary road network for the Chancay Port, such as a tunnel connecting the Andes Mountains to the Pan-American Highway. This allows goods from Brazil, Colombia, and Venezuela to quickly move from the Chancay Port to any country along the Pacific coast. With the Chancay Port, the trade competitiveness of Latin America across the entire Pacific region has significantly increased.

The China-built Chancay Tunnel and Link Road project in Peru saw full completion of its main structure after concrete pouring finished on October 9th

Furthermore, from a political perspective, the opening of the Chancay Port was actually a major victory for the people of Latin America in resisting U.S. hegemony.

The construction of the Chancay Port was not without its challenges. In 2019, China’s COSCO Shipping Ports Ltd., a subsidiary of China Ocean Shipping (Group) Company, acquired 60% of the shares of the Chancay Port Company for $225 million, officially initiating the Phase One construction project of the former Chancay Port. Due to the evident economic potential, former Peruvian President Pedro Castillo attached great importance to this project. In 2021, the Peruvian government granted exclusive operating rights of the Chancay Port to COSCO Shipping. Even after President Dina Boluarte took office in 2022, she continued to prioritize the Chancay Port, initiating the construction of an industrial park and associated plans to attract Chinese investment.

However, in October 2023, the American think tank CSIS suddenly began to hype up concerns about the Chancay Port, claiming that the U.S. government was very “concerned” about Peru’s national security. The Financial Times, in its report, cited statements from General Laura J. Richardson, the 32nd Commander of US Southern Command, alleging that Chancay could definitely accommodate Chinese warships, suggesting that Peru could potentially be used by the Chinese navy as a foothold in South America.

In response to the objections from the United States, the Peruvian Foreign Minister Javier González-Oleachea, pointed out that if the U.S. was concerned about China’s growing presence in Peru, then the U.S. should strengthen its own investments in Peru. However, on January 1, 2024, the Peruvian National Port Authority unilaterally announced that the exclusive operating rights granted to COSCO Shipping Group in 2021 were an administrative error and should be revoked. The reason cited was that the Peruvian Congress believed the Port Authority did not have the authority to grant exclusive operating rights to companies. However, the exclusivity was a prerequisite for additional investments by the Chinese company, and if the contract was breached, not only would COSCO Shipping Ports Ltd. be accountable to investors, but the Peruvian government would also have to pay significant compensation. The Chancay Port, a project beneficial for both China and Peru, was on the verge of turning into a lose-lose situation.

Based on China’s non-interference policy, this dilemma could only rely on the Peruvian people’s own choices. Fortunately, on May 30, President Dina Boluarte successfully persuaded the Peruvian Congress to pass an amendment to the National Port System Law with a vote of 68 in favour, 24 against, and 4 abstentions, confirming the Port Authority’s right to grant exclusive operating rights to companies.

On June 24th, the Peruvian Congress announced that the government lawyer had formally requested the judge to dismiss the civil lawsuit against the Congress, legally safeguarding COSCO’s exclusive operating rights over the Chancay Port. This once again instilled confidence in investors associated with COSCO Shipping Group, allowing the Chancay Port to finally proceed with its original plans for operation.

On November 14th, with the shared blessings from the people of Peru and China, a gateway from Latin America to Asia was opened. However, according to a report by Bloomberg on the 16th, Mauricio Claver-Carone, an advisor to the Trump transition team, was not pleased. He claimed that “Any product going through Chancay or any Chinese-owned or controlled port in the region should be subject to 60% tariff as if the product was from China,”

In response, Chinese strategist Professor Wang Xiangsui pointed out that for the United States to improve its economy, it needs to rely more on constructive means rather than just imposing tariffs. The fundamental reason why American manufacturers have lost competitiveness in the market, and in some cases even the ability to produce certain products, is due to the massive deindustrialization that led to the loss of a large number of technical workers and engineers in the United States. Therefore, imposing tariffs on Chinese goods will only make Chinese products more expensive overnight, without enabling American manufacturers to quickly regain the industrial chains and technical talent needed to produce these products. The American people are not likely to abandon their modern way of life suddenly because of the White House’s wishes. Thus, increasing tariffs on Chinese goods ultimately only punishes the American people.

CNBC reported that the U.S. bears over 90% of the costs of the tariffs imposed on Chinese goods, with most of the tariff costs borne by American importers.

This 2021 report highlighted that economists believe Trump’s tariff policies toward China have harmed the U.S. economy. However, it seems that the Trump administration’s second term is not clever enough to learn from these lessons. This may also explain why Latin America is more inclined to cooperate economically with China rather than the United States.