Peru moves to revoke exclusivity agreement with China for management of ‘megaport’ near Lima

By Michael Stott

A Chinese state-owned shipping company building one of Latin America’s biggest deepwater ports has criticized a move by the Peruvian government to remove its exclusive right to operate the facility.

The first phase of the Chancay megaport, north of Lima, is due for completion this year.

China Cosco’s Peruvian arm said a decision by authorities in Lima to seek to annul the exclusivity granted over the Chancay megaport affected the “security and legal stability of investment”. The exclusivity had been a “relevant factor” in the company’s decision to spend $1.3bn on the construction of its first phase, it said.

The company added that it “has been evaluating the impact which this measure is producing on the development of the project”, in a statement that raised questions over China Cosco’s commitment to future phases of the scheme, which is due to cost $3.6bn in total.

Chancay, 70km north of Lima, has raised concerns in Washington because of American fears that China is gaining control of large amounts of critical infrastructure in Peru, a crucial mining nation. The Financial Times reported last year that the US had expressed concern to President Dina Boluarte’s government over the issue.

Chinese companies have taken stakes in ports across Latin America, as well as building 5G mobile networks, major roads and bridges and space monitoring stations. “They are on the 20-yard line to our homeland,” General Laura Richardson, commander of US Southern Command, said in August.

Beijing insists that mutual benefit is the cornerstone of its overseas infrastructure projects, an approach it contrasts with what it calls Washington’s pursuit of hegemony and geopolitical advantage in Latin America.

The Peruvian government has trumpeted Chancay, capable of berthing some of the world’s largest cargo ships and drawing maritime traffic from Chile, Ecuador and Colombia, as an important investment success.

Its initial phase is due to be inaugurated in November when Chinese leader Xi Jinping visits Peru for a summit of the Asia-Pacific Economic Cooperation forum.

Beijing’s ambassador to Peru, Song Yang, has promoted the megaport enthusiastically, saying that “China is betting that Chancay will become Peru’s Shanghai”.

But Peru’s National Port Authority said on Friday it was seeking to annul the exclusive right it had granted China Cosco in 2021 to operate the port because of an “administrative error”, adding that under Peruvian competition law it did not have the power to grant such a right.

The port authority insisted its move would not affect construction of Chancay, which is more than 70 per cent complete, and that it would continue working with the Chinese company to finish the project by the planned date.

China Cosco, however, expressed surprise that Peru’s attempt to remove exclusivity came three years after it had been granted in a public process that received no complaints at the time. The company is building Chancay along with a junior partner, Peruvian mining company Volcan.
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Credit: Financial Times