The United States has expressed concern about Peru because China is taking control of key parts of the South American country’s infrastructure, including power supplies to the capital Lima and a massive new port on the Pacific coast.
Chinese companies have been buying power, mining and port assets across Latin America in recent years, but the scale of Beijing’s investment in Peru and its strategic position have raised particular concerns, a senior U.S. official said. Washington has raised the issue directly with Lima.
“On major geostrategic issues, the Peruvian government has not paid sufficient attention to analyzing the interests and threats to the country,” the official, who spoke on condition of anonymity, told the Financial Times.
A spokesman for the Peruvian prime minister did not respond to a request for comment, but a source close to the government acknowledged U.S. concerns.
“The main problem is… Chinese capital has acquired companies such as power and mining. From a geopolitical perspective, their concerns are justified,” the person said.
In April, Italian energy company Enel announced the sale of its Peruvian power business, which supplies power to northern Lima, to China Southern Power Grid International for $2.9 billion. Lima’s remaining electricity supply was sold to another Chinese company, China Three Gorges, in 2020. CTG also owns the Chagla Dam, one of the largest hydroelectric dams in Peru.
The National Chamber of Industry of Peru complained that if Enel’s sale was successful, it “would lead to 100% concentration of the Lima electricity distribution market in the hands of the People’s Republic of China”. Peruvian competition authorities are reviewing the deal.
In addition, Chinese state-owned shipping and logistics company COSCO is building a deep-water port in Chancay, 70 kilometers north of Lima. It will be able to accommodate some of the world’s largest cargo ships and replace maritime traffic at Pacific ports in Chile, Ecuador and Colombia.
The first phase of the plan is ultimately expected to cost $3.6 billion and will be launched late next year when President Xi Jinping visits Peru for the APEC summit.
COSCO Group owns 60% of the large port, with Peruvian mining company Volcan holding the remaining shares. “All back-end infrastructure at the Port of Chancay will be controlled by foreign powers, which should be of great concern to the Peruvian government,” the official said.
Peruvian Transport Minister Raul Pérez-Reyes said that Peru “is a sovereign country and builds its international relations on this basis”.
He pointed out that Peru’s largest trading partners are the United States and China, adding: “Investments are welcome that respect our sovereignty and are consistent with the changes we need to minimize climate change, accelerate the process of digital transformation and reduce inequalities.”
Washington has recommended to several Latin American countries that each establish a government committee to review foreign investment in strategic areas on national security grounds, modeled after the U.S. Interagency Committee on Foreign Investment (Cfius).
China’s ambassador to Peru, Song Yang, who promoted the megaport project, recently said that “China is betting that Chancay will become the Shanghai of Peru.”
But there are concerns that Qiankai could repeat a pattern seen elsewhere, in which Chinese companies build “dual-use” port facilities primarily for cargo but large enough for Beijing’s navy to resupply warships.
In 2018, the year before COSCO took a majority stake, the port was redesigned to increase throughput.
Gonzálo Ríos Polastri, deputy general manager of COSCO Shipping Ports in Chancay, Peru and former Peruvian navy admiral, said that China’s investment in Chancay is “100% commercial.” And added: “This is an investment made by private enterprises in accordance with market rules. It may have different geopolitical interpretations, but it is not an investment that has any impact on national security.”
Beijing views Peru as an important source of minerals for its resource-hungry economy, importing $14 billion worth of copper ore from the country last year, second only to Chile.
The Chinese government insists that a commitment to mutual benefit is the cornerstone of its overseas infrastructure projects, an approach that stands in stark contrast to Washington’s alleged pursuit of hegemony and geopolitical advantage in Latin America. Song called on the Peruvian media to “report fairly and objectively” on China-Peru relations.
Chinese companies have taken stakes in ports across Latin America and built 5G mobile networks and space monitoring stations. “They are on the 20-yard line from our homeland,” Gen. Laura Richardson, commander of U.S. Southern Command, said in August.
Evan Ellis, a professor of Latin American studies at the U.S. Army War College, said the Chinese “are seeking to reshape the world for their own economic interests…”. . Port infrastructure is part of achieving this goal.”
Ellis said he doubted the idea of using Chankai for military purposes “had been with the Chinese from the beginning”, although he believed the main motive was to capture a greater share of the logistics trade.
He said that if Beijing decides in the future that it needs to build naval facilities on the Pacific coast of the Americas, “Chancay Island is large, has deep water and is far enough away from the United States” to survive in the event of hostilities. Ellis added that it was “conceivable” that China could use it to resupply naval ships, as it did with the Hambantota port it built in Sri Lanka.
Chinese investors in 2018-19 tried to lease nearly half of El Salvador’s coastline for ports and a series of free zones, a move that drew the ire of the United States. Diplomats familiar with the matter said Washington was urging the Salvadoran government to abandon the idea.
Additional reporting by Ryan McMorrow in Beijing
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