China's Megaport in Peru Alarms US Officials

China is building a $3.5 billion megaport in Peru that could speed trade between Asia and South America and provide Beijing with an economic foothold in the region, historically dominated by the U.S., the Wall Street Journal reported.

The project, backed by Hong Kong-based Cosco Shipping Ports, also has raised concerns  among U.S. officials about national security implications.

"This changes the game," said Eric Farnsworth, a former high-ranking State Department diplomat who now leads the Washington office of the Council of the Americas think tank. "It really platforms China in a major new way in South America as the gateway to global markets. It is not just a commercial issue at that point, it is a strategic issue."

Cosco began developing Chancay port in 2019 as a hub in the South American Pacific and key growth driver for Peru. In 2021, Peru's National Port Authority (APN) awarded Cosco the exclusive right to run Chancay, but said in March that it never had the legal authority to grant it. It blamed an "administrative error" and requested that a judge void the terms.

Some local officials have sought to backtrack on the deal, but Cosco insisted in May on terms agreed to with the government. Peruvian President Dina Boluarte last week signed an amendment empowering the National Port Authority to grant exclusive operational rights to private companies.

The port will be the first on South America's Pacific coast able to receive megaships and is 4,500 miles from San Francisco, or on America's "20-yard-line," said Gen. Laura Richardson, head of the U.S. Southern Command.

"This will further make it easier for the Chinese to extract all of these resources from the region, so that should be concerning," Richardson said at a Florida International University security conference in May.

The U.S. is concerned about the potential for China to use the port for military purposes, according to the Wall Street Journal.

"Peru is further increasing its economic dependency on China and making itself vulnerable to potential Chinese economic coercion," said Leland Lazarus, an expert on China-Latin America relations at Florida International University.