Zhang Jun diligently followed the news as Peru’s Chancay Port was developed into the largest deepwater project of its kind on South America’s long Pacific coast.
His Nanjing-based company, Jiangsu Haosanyou Information Technology, helps ocean freight shippers do business in China’s supply chains via the Internet. For Zhang, the $3.5 billion megaport, which was inaugurated on November 14, heralds a boom in Chinese e-commerce in Latin America, where conventional Chinese trade is already growing.
The newly opened container port will reduce shipping times between Shanghai and Peru by 10 to 12 days, reducing transit times to approximately 23 days. It will also reduce logistics costs for shipments between China and Peru by at least 20 percent, the state-run China Global Television Network (CGTN) reported.
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Zhang said the efficiency of China’s logistics sector should amaze South American consumers.
“In this industry, we all have the idea of going abroad,” Zhang said at a logistics fair in Hong Kong in mid-November.
“We aim to bring mature investments from within China to the rest of the world. In the future, private companies like ours will look positively at these investments. South America is a great opportunity for us.”
Zhang, who founded his company six years ago, is riding a wave. China has been pursuing trade with Latin America for more than a decade through trade deals and infrastructure commitments.
The new port was developed by state-owned China Cosco Shipping Corporation with the help of a $1.3 billion injection from the Chinese government.
The project started in 2011 in the small town of Chancay, 78 km north of Lima, the Peruvian capital. It has four berths with a maximum depth of 17.8 meters (58.4 feet), meaning it can accommodate ultra-large container ships.
Throughput capacity, which refers to the amount of cargo that can be handled per year, will start at a hefty 1 million 20-foot equivalent units and rise, making Chancay “an important hub” for trade between Latin America and Asia, CGTN reported.
Elsewhere on America’s Pacific coast, the Port of Los Angeles handled about 6.4 million 20-foot equivalent units last year and the Port of Oakland about 2 million.
Ports in Panama, known for its shipping channel between the Pacific and Atlantic Oceans, handled 8.32 million 20-foot equivalent units last year. And one Latin American port focused on the Pacific Ocean frequented by Chinese shippers, the Mexican port of Manzanillo, handled 1.7 million ships.
“There will be huge savings in logistics budgets and it will generate revenue for Peru,” Chinese President Xi Jinping said in Lima on the day the port was inaugurated, according to a live blog posted by Peru’s El Comercio news website.
“Today we are witnessing the birth of a new maritime corridor for the new era.”
The timing couldn’t be better. This year, a Chinese free trade agreement with Ecuador came into effect and Beijing signed an agreement with Venezuela on protecting each other’s investments.
Colombia agreed in October to join the Belt and Road Initiative, a Chinese effort to smooth global trade routes by building new infrastructure, and China and Peru this month upgraded a 15-year-old free trade deal.
Chinese exports to Peru – mainly mobile phones, computers, toys and LCD televisions, but with construction equipment deliveries also rising sharply – grew 12.3 percent year-on-year to $11.32 billion in the first ten months this year, according to customs data. Imports from Peru increased by 16.2 percent to $24.5 billion in the same period.
In terms of total trade with South America, the country mainly exports smartphones and equipment for public utilities and factories, and imports raw materials including Venezuelan oil, Chilean copper and Brazilian soybeans.
China has collaborated with 22 Latin American countries on conveyor and road infrastructure projects, with shipments to and from Chile, Colombia and Ecuador also likely to pass through Chancay.
Naubahar Sharif, a professor of public policy at the Hong Kong University of Science and Technology, said the new port “will improve the efficiency and volume of trade between Latin America and China, and potentially more broadly with Asia.”
“We will likely see more exports of agricultural products such as meat and soybeans from Latin America to China, as well as more imports of products such as electrical goods and electric vehicles from China to Latin America,” he said.
The United States was China’s largest export market by country last year, although deliveries in U.S. dollars fell 13.1 percent, largely due to U.S. ‘onshoring’ and ‘near-shoring’ of factory work.
Trade tensions between China and the US began to intensify six years ago when Donald Trump imposed tariffs of 10 to 25 percent on Chinese imports during his first term as US president.
Chinese exporters refocused on non-US markets to avoid the tariffs, and more of the same can be expected now that Trump has pledged to impose 60 percent tariffs on US imports from China in his second four-year term starting in January will lift. .
South American countries will need more semiconductor chips and machines to build roads or mine, said Gary Yim, business strategist at Bollyman Express, a parcel delivery service in Hong Kong. He said China could now send these shipments by sea and in turn ultimately benefit from a more prosperous South America.
“China has surplus road construction equipment,” Yim said. “The strategic value is the whole package, not just the shipping.”
Over the past century, the U.S. has fostered deep political alliances and trade ties throughout Latin America. Washington has six free trade agreements with eleven Latin American countries, including three in South America.
According to the US Congressional Research Service, the US accounted for 31 percent of Latin America’s imports and 45 percent of goods exports last year.
U.S. imports from Peru rose 1.28 percent to $8.7 billion last year, a slowdown from more than 20 percent annual growth in 2021 and 2022.
Mauricio Claver-Carone, an adviser to the Trump transition team, was quoted by US media last week as saying that the US should impose tariffs of 60 percent on imports from any country that passes through the port of Chancay.
But Trump is expected to make life easier for China overall by turning away from any expansion of U.S. free trade efforts around the world — reducing competition with Beijing — and focusing instead on domestic interests, a core message of his campaigns since 2016.
Routine Chinese trade in South America is unlikely to encounter any U.S. objection even as it grows, said Evan Ellis, research professor of Latin American studies at the U.S. Army War College’s Strategic Studies Institute.
But U.S. officials would raise a red flag if China used trade as a form of coercion against a Latin American country or as a means of espionage, Ellis said.
He said Washington would also refrain from further using Latin American countries to transship Chinese exports to the US as a means of avoiding higher tariffs on direct imports from China. Chinese factories aimed at the American market are already emerging in Mexico and Trump is threatening tariffs of 25 percent there.
“From an American perspective, there are different types of trade, some of which are more problematic than others,” Ellis said.
A Trump campaign promise in 2024 of tariffs of 10 to 20 percent on almost all imports would broaden the appeal of global trade excluding the U.S. and raise China’s profile as a major player, Sharif said.
“Whether China would play a more central role, I think that is exactly what President Xi alluded to in his speeches in Peru: the need to continue with multilateralism,” he said.
“And since he is flying this flag most enthusiastically, it is safe to say that China will be a more central player in such a new world.”
People perform during the inauguration ceremony of the Chinese state port Cosco Shipping Chancay in Chancay, Peru. Photo: APEC Peru/Handout via Reuters alt=People perform during the inauguration ceremony of the Chinese state port Cosco Shipping Chancay in Chancay, Peru. Photo: APEC Peru/Handout via Reuters>
Export-dependent China, the world’s second-largest economy, has aggressively accelerated trade ties in Africa, the Middle East, Southeast Asia and South America since the end of the first Trump administration in early 2021.
A lack of hostility in Washington would allow Chinese traders and investors to focus on tackling obstacles likely to arise in South America, which has a combined population of 442 million.
Some parts of the continent are known for strict labor regulations, protests over environmental degradation caused by major projects and disputes over control of resources.
Protesters in Lima complained in July that dynamite explosions to clear the Chancay port construction site had damaged nearby homes and posed risks to food and water, according to consultancy Blueberries.
In Ecuador, where China National Petroleum Corporation has operated oilfield services since 2003, foreign oil companies must hire local workers.
Chinese e-commerce investors will come under pressure to operate in accordance with South American laws and local ways of doing things, Zhang said. “We must have an open, tolerant view of investments in other countries,” he said.
Additional reporting by Alice Li and Mia Nulimaimaiti
