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https://es.slideshare.net/slideshow/peru-and-its-relationship-with-china-and-the-us-in-the-context-of-the-rivalry-between-the-great-powers/273886447
Carlos Aquino Rodriguez*
Abstract
In recent years, China's growing presence in Latin America has become quite evident. This can be seen in the region's increased trade with China, to the point that this country is already the region's second largest trading partner (or the first if one excludes Mexico), and the Asian giant is also one of the main investors, and one of the largest lenders.
This increased presence of China in the region has aroused the suspicion of the United States, since Latin America is (or was) considered a region of traditional influence of the North American giant. Where China's presence is probably most visible, and where a kind of competition between China and the United States for a greater presence could be seen, is in Peru.
In this article we will look at Peru's relations with China and the United States, in the context of what could be called the rivalry between the great powers, as it has evolved in recent years, in the political-diplomatic, economic, and security fields. In the end, as a conclusion, we will see what the future of Peru's relationship with these two powers may be like.
Key words: China and US in Peru, Great power competition, Peru China trade, Peru US trade, Chinese FDI in Peru, US FDI in Peru, future of China Peru relations
Introduction
Since Trump's rise to power in 2017, the growing competition between the US and China has become evident. It was with Trump that the US began to systematically take a series of measures against China, which it views as a strategic rival.
The aforementioned can be seen in the context of the so-called rivalry or competition between great powers. According to a brief definition, this refers to "when great nations compete for greater power and influence, not only in their own parts of the world, but also beyond.” .
The 2017 US National Security Strategy, under the Trump administration, already warned of the challenge posed by China (and Russia) to US interests and global position. This concern remained in the 2022 National Security Strategy, under the Biden presidency, where China is identified as the main competitor seeking to reshape the international order, taking advantage of its growing power in various areas.
Thus, the US, regardless of the administration's political affiliation, Republican or Democrat, has assumed a clear competitive stance towards China since 2017, and has announced measures to prevent this country from increasing its influence in the Latin American region. This strategy is outlined in the "National Security Strategy" documents from 2017 and 2022, mentioned previously, on page 51 of the first document and page 40 of the second. They mention the objective of strengthening the economic and political (and even military and security) ties of the US with the region.
Thus, starting in 2018, the so-called US trade war with China began , when the US imposed a 25% tariff on 34 billion dollars of imported Chinese products. Also around this time, the US began a series of actions to "warn" Latin American countries about the "dangers" of growing Chinese influence in the region and took concrete steps to prevent this. Let's examine this in the context of Peru's relations with the US and China.
I. Political and Diplomatic Relations
Peru has a very long-standing relationship with the US, with diplomatic relations dating back to 1827, six years after Peru achieved its independence.
Until 2010, the US was the largest destination for exports, and until 2014, it was Peru's main trading partner . It was then replaced by China. In 2006, Peru signed a Free Trade Agreement with the US, called the Trade Promotion Agreement, which entered into force in February 2009.
However, starting with the Trump administration, the US began to "warn" Peru about the growing Chinese influence in the country. During the visit of the US Secretary of State to Peru in April 2019, Mike Pompeo, in an interview with the newspaper El Comercio, warned Peru of the "dangers" of adopting Huawei technology. He literally said, "If they want to implement telecommunications infrastructure in their countries, we want to make sure they have their eyes wide open. If those telecommunications systems and networks are installed, like Huawei technology, people's information will be in the hands of President Xi Jinping and the Chinese Army. I don't think Peruvians want this, and we want to make sure everyone understands the risks involved in engaging in that kind of activity with China .
This US warning to Peru occurred within the broader context of Pompeo's visit to four South American countries: Colombia, Peru, Chile, and Paraguay. It is likely that the same warning was issued to all four countries, but it particularly drew attention in Peru and Chile , nations with stronger economic ties to China. High-ranking representatives from these countries, including the Chilean president, were scheduled to travel to China later that month to attend the Second Belt and Road Forum in Beijing. Pompeo's criticism of Huawei generated considerable discussion in Chile, as the Chilean president had included a visit to Huawei's headquarters in Shenzhen in his itinerary.
In October 2023, a front-page article in the Financial Times, a prominent UK newspaper, reported that the "United States has expressed concern to Peru that China is gaining control over critical parts of the South American nation's infrastructure, including the electricity supply to the capital Lima and a new megaport on the Pacific coast.” . As explained later, two Chinese companies acquired assets in 2019 and 2023 that granted them control of 100% of Lima's electricity distribution. Moreover, a Chinese company is constructing a port in Chancay, north of Lima, with the first phase set to be inaugurated in November 2024. This port is poised to become the largest and most modern port hub in Latin America's South Pacific
Another article in the Wall Street Journal from June 2024 also addresses the growing "concern" in the US regarding China's influence in Peru. According to the article, "Peru ranks fifth among the nations most influenced by China globally, based on an indicator developed by two organizations critical of Beijing.” .
To the best of our knowledge, these concerns raised by the United States with the Peruvian government have been communicated through informal conversations between government officials during meetings with their Peruvian counterparts. However, in the past two years, members of both the US government and Congress have visited Peru and expressed these concerns to Peruvian officials and even other members of society, such as academics.
To counter what the United States calls "the growing Chinese influence in Peru," the US government is increasing its collaboration with Peru in maritime surveillance for illegal fishing (the US points to Chinese vessels participating in this activity). It is also increasing the number of Peruvian police and military personnel trained in the US and expanding academic exchanges with Peruvian universities, for example, by inviting them to the US to participate in student exchange fairs. There is also talk of the US National Space Agency potentially being interested in opening a spaceport in northern Peru. NASA and the Peruvian Space Agency are working together to launch sounding rockets.
The year 2024, in which Peru is hosting the Asia-Pacific Economic Cooperation (APEC) forum meetings, has seen considerable activity from the United States to increase its presence in the country. For example, first, it is assisting Peru with the logistical aspects of the meetings; second, it is increasing visits by government officials and meetings with Peruvian government officials; third, some of its companies are also increasing their presence. In May 2024, Google awarded 5,000 scholarships to Peruvian students for training in digital economy and artificial intelligence. .
In what could be a clear example of the US's open competition with China in Peru, it is interesting to note the US action or reaction to the announcement that Huawei signed an agreement with Peru to train 20,000 young Peruvians in new information technologies. This announcement was made during the Peruvian president's visit to China in June 2024 . The following month, Microsoft announced it would provide 5,000 scholarships for Peruvians to train in digital skills. .
The Americas Partnership for Economic Prosperity (APEP) illustrates the renewed commitment of the United States to the continent. President Biden introduced the idea at the 2022 Summit of the Americas, , and the initiative materialized in November 2023 with the participation of twelve countries, including the United States, Barbados, Canada, Chile, Colombia, Costa Rica, Ecuador, Mexico, Panama, the Dominican Republic, Uruguay, and Peru.
When comparing the relationships of Latin American countries with China, Peru stands out as having the closest ties. This is reflected in the fact that China absorbs 36% of Peruvian exports of goods, a percentage that is projected to continue increasing. Additionally, Foreign Direct Investment (FDI) from China represents almost a quarter of the total stock in Peru, placing it as the second largest recipient of Chinese investment in Latin America. (More information on this topic can be found in the section on economic relations with China, later in this document).
The economic complementarity between Peru and China is a key factor in understanding the scope of their relationship. Peru, with its abundant natural resources, especially in the mining sector, and China, with its capital, technology, and vast markets, complement each other. However, Peru's history and geostrategic position in South America are also important elements in understanding the growing Chinese presence in the country. Beyond the economic and geopolitical factors, there is a special bond that has marked the relationship between the two countries over time.
Peru is home to the largest Chinese community in Latin America due to the arrival of Chinese workers since 1849, who were employed in sugarcane and cotton plantations, as well as in guano collection. . It is estimated that between 1849 and 1872, approximately one hundred thousand Chinese arrived in Peru.
Peru established diplomatic relations with the People's Republic of China in 1971 (being the third in the region after Chile and Cuba), but earlier, in 1874, Peru had been the first country in Latin America to establish diplomatic relations with the Qing Empire, which at that time ruled China.
In 2008, Peru and China established a Strategic Partnership agreement with the purpose of going beyond the commercial relationship and strengthening ties in political and cooperation matters. This implies interaction between various public entities, political parties, and civil society from both countries. Likewise, the agreement promotes consultation and cooperation in international forums in which both nations participate.
In 2009, a Free Trade Agreement (FTA) was signed, which entered into force in 2010. This agreement laid the foundation for broader cooperation, which was consolidated in 2013 with the creation of the Comprehensive Strategic Partnership. This partnership covers various areas, from technical and cultural exchanges to the construction of key infrastructure, such as the National Emergency Operations Center, with Chinese support.
The importance of China to Peru has been evidenced in various symbolic gestures. In 2016, Pedro Pablo Kuczynski, on his first trip abroad as president, chose China as his destination, thus recognizing the relevance of the bilateral relationship. During the COVID-19 pandemic, in February 2021, Peru received its first vaccines from the Chinese company Sinopharm. Subsequently, in July 2021, President Pedro Castillo visited the Chinese embassy before assuming the presidency.
Finally, President Dina Boluarte has held important high-level meetings with China. In November 2023, Boluarte and President Xi Jinping met at the APEC summit in San Francisco. Also, in June 2024, President Boluarte made an official visit to China. As the host of APEC this year, Peru will receive President Xi Jinping in November for the Leaders' Summit and the inauguration of the first stage of the Chancay port.
II. Economic Relations
As mentioned, the United States was Peru's most important trading partner until 2014, when it was replaced by China. Table 1 below shows Peru's main trading partners today.
Table 1: Peru's Main Trading Partners, 2022 and 2023
Source: MINCETUR https://www.gob.pe/institucion/mincetur/informes-publicaciones/5158832-reportes-de-comercio-reporte-mensual-de-comercio-exterior-diciembre-2023
In 2023, 17.1% of Peru's total trade in goods (exports plus imports) was with the US, while China's share was 31.7%. In particular, Peru's exports to China are 2.5 times greater than those to the US. Given the structure of Peru's exports, which mainly consist of natural resources such as minerals, hydrocarbons, and fishery products, and considering that China is the world's factory, it is plausible that exports to China will further increase while exports to the US will decrease.
However, the United Srates remains the primary destination for Peru's non-traditional exports, which encompass products beyond raw materials. 31% of Peru's non-traditional exports go to the US, compared to only 5% to China. Notably, agricultural exports, which have experienced rapid growth in recent years, find their largest market in the US, accounting for 36% of the total. Additionally, 50% of textile exports are destined for the US. Refer to Chart 1 for a visual representation of this data.
Chart 1: Main Destinations of Peru's Exports by Sector
Source: MINCETUR https://www.gob.pe/institucion/mincetur/informes-publicaciones/5158832-reportes-de-comercio-reporte-mensual-de-comercio-exterior-diciembre-2023
However, there could be an opportunity to increase Peru's exports to the United Sates if Peru can benefit from the phenomenon of friendshoring or nearshoring. In the US competition with China, the former does not want to depend on the latter for the provision of certain goods and is encouraging companies to leave China and relocate their production to friendly countries (friendshoring) or nearby countries (nearshoring). Peru could benefit from this phenomenon.
Regarding foreign direct investment from the US in Peru, according to figures from the US government, at the end of 2022, the stock of US FDI in Peru was 9.1 billion dollars. Most of that investment was in mining, wholesale trade, and manufacturing . According to figures from the Peruvian government's agency Proinversion, at the end of 2023, the stock of US FDI was 3,236 million dollars, making it the fourth most important investor in the country. However, these figures are not entirely reliable, as companies are not obligated to register their investments. See Table 2.
Table 2: Stock of Foreign Direct Investment in Peru
Source: Proinversion: https://www.investinperu.pe/es/invertir/estadisticas-generales/inversion-extranjera-directa https://www.investinperu.pe/RepositorioAPS/0/0/JER/ESTADISTICAS_IED/Saldo-de-Inversion-Extranjera-Directa-por-Pais-de-Domicilio-1982dic2023.pdf (Página 2)
The US has shown a renewed interest in increasing its investments in Peru in recent years. For instance, the desire of United States companies to compete with Chinese companies was evident in the April 2024 bidding process for the concession of oil block X in the north of the country, which was won by a consortium led by the US company Offshore International Group INC. This consortium offered to invest 800 million dollars in the exploitation of this block, which produces 30% of the country's oil. . This block had been granted in 1994 for a period of 30 years to the China National Petroleum Company, and despite its interest in continuing, it ultimately did not participate in the bidding process. .
United States companies have shown great interest in the oil and gas sector in the country. Hunt Oil owns 25% of the Camisea gas field and 50% of the company Peru LNG. . Camisea is the most important mega gas field in Peru and one of the largest in Latin America.
Furthermore, in September 2024, the US signed a memorandum of understanding with Peru for cooperation on critical minerals. . As is known, critical minerals are a topic of great importance in the competition between China and the US, countries that primarily want to ensure access to these minerals. Peru possesses, among other such minerals, lithium.
Furthermore, the US is partnering with other countries to invest jointly in Peru and thus try to compete with China, particularly in the infrastructure sector, where the Chinese presence is increasingly significant and where the US has shown the greatest concern, as previously discussed. For example, in early October 2024, the US ambassador, along with the UK ambassador, met with the Peruvian Minister of Transport and Communications to review plans for the technological modernization of the country's railways. .
It is noteworthy that, in recent years, given the challenges faced by the Peruvian government in executing public works independently, it has resorted to the government-to-government contracting scheme, where it contracts a foreign government to carry out these projects. The assumption is that the foreign government possesses greater experience than Peru in executing such works. One of the countries with which the Peruvian government has most frequently contracted for the execution of public works is the UK government. This approach potentially allows countries like the US to participate in public infrastructure projects and compete with Chinese companies. Japan, for instance, has already begun participating in this type of project, having reached an agreement with the Peruvian government in May 2024 for the construction of a highway in northern Peru under the government-to-government contract scheme.
Recently, there has also been interest from some US investment funds in increasing their investments in Peruvian ports. For example, in early October 2024, representatives from Global Infrastructure Partners (GIP) arrived to explore possibilities for expanding their investment in the ports of Matarani and Salaverry. . The port of Matarani, located in the south of the country, handles the largest volume of mineral cargo in Latin America, with 50% participation from US investors.
Finally, in terms of cooperation, specifically bilateral assistance, the United States has been the second largest contributor to Peru in the last decade. According to a report, from 2011 to 2019, Peru received 4.419 billion dollars in bilateral assistance from the Development Assistance Committee (DAC) of the OECD countries (Organisation for Economic Co-operation and Development). Of this amount, 24.5% came from the United States, making it the second largest donor to Peru, after Germany, which contributed around 28% of the total, followed by Japan in third place with about 14%. See Table 3.
Table 3: Evolution of Bilateral Assistance to Peru from 2011 to 2019
Source: Ministry of Foreign Affairs of Japan, MOFA: “Evaluation of Japan´s ODA to the Republic of Peru” Marzo 2022
For more recent data, see Chart 2 below, which shows aid to Peru from the four main OECD member countries. As can be seen, the US remains in second place among the countries providing aid to Peru.
Chart 2: Aid to Peru, from 2002 to 2022, from some OECD countries, in millions of dollars
Source: Korea International Cooperation Agency, KOICA https://www.oda.go.kr/opo/nnada/eng/opoNnadaOtrDonaSportCurstatList.do
An analysis of the trade relationship between Peru and China reveals the growing importance of the Chinese market. In 2023, China absorbed 36% of Peruvian exports of goods, valued at 23.156 billion dollars, far exceeding the United States, which received only 14.2% (see Table 1). This trend contrasts with the situation in 2010 when both countries received the same percentage of exports (15%). In 2000, the United States was the main destination for Peruvian exports (27.5%), while China ranked fourth (6.4%). As for imports, in 2023, China accounted for 26% of the total and the United States 21%.
Exports are a key engine for Peru's economic growth. In 2023, exports reached 64.355 billion dollars, compared to imports of 48.750 billion dollars. The value of exports has experienced significant growth in recent decades: in 2010, it was 35.805 billion dollars ; in 2000, 7.028 billion dollars ; and in 1990, 3.276 billion dollars. . Between 2000 and 2023, Peruvian exports multiplied by 9.2. Peru's trade surplus in 2023 was 13.631 billion dollars, and 77% of this surplus (10.504 billion dollars) corresponded to trade with China (see Table 1).
China's share of Peruvian exports is especially relevant in the mining sector. 63% of Peru's total exports correspond to minerals, and China receives 52% of these exports. Also, China is the destination for 43% of exports of fishery products. In 2023, copper accounted for 36.6% of Peruvian exports, and China imported almost 73% of this metal. Chinese companies have a prominent presence in Peruvian mining: Las Bambas (a consortium of MMG Limited, Guoxin International Investment Co. Ltd., and CITIC Metal Co. Ltd.) is the third largest exporter of minerals, and Shougang ranks seventh (MINCETUR, 2023).
As seen in Chart 3, according to figures from the Ministry of Foreign Trade and Tourism, bilateral trade between Peru and China increased exponentially in the last two decades, particularly since the Free Trade Agreement (FTA) between the two countries entered into force in 2010.
Chart 3: Peru-China Trade
Source: MINCETUR: Reporte de Comercio Bilateral Anual 2023 Peru China https://consultasenlinea.mincetur.gob.pe/rep_comer_bilat/comercio
In the following Table 4, you can observe in detail the products that Peru sells to China, where a large part, 91.4%, are mining products (2023 figure). Copper constituted 72.5% of everything that Peru exported to China in 2023.
Table 4: Exports of goods to China
Source: MINCETUR: Reporte de Comercio Bilateral Anual 2023 Peru China
The negotiations to update the Free Trade Agreement (FTA) with China, in effect since 2010, have already concluded and it is expected to be signed in November this year when President Xi Jinping visits Peru to attend the APEC forum Leaders' Summit in Lima.
Regarding investments, China has invested more than 30 billion dollars in Peru, and more than 200 companies operate in the country, according to the Chinese Ambassador to Peru, Song Yang, in an interview he gave to the newspaper Gestión on September 30, 2024.
According to figures from the United Nations Conference on Trade and Development (UNCTAD), at the end of 2023, Peru had a stock of foreign direct investment of 132.546 billion dollars (UNCTAD, World Investment Report 2023) . However, according to a study by the American Enterprise Institute (AEI), published in July of this year, 2024, between 2005 and June 2024, the amount invested by China in Peru, including construction, was around 31.83 billion dollars, and Peru was the second largest destination for Chinese investment in Latin America, after Brazil. See Chart 4. If so, Chinese investment would represent 24% of the total Foreign Direct Investment in Peru and is probably the largest foreign investor in the country.
China began investing in Peru in the 1990s, with Shougang Corporation starting in 1992 and China National Petroleum Company in 1994. Therefore, China's FDI in Peru is much greater than the figure of 31.83 billion dollars calculated by the American Enterprise Institute, which only calculates Chinese investment from 2005 onwards.
Chart 4: Chinese Investment in the World
Sources: AEI: https://www.aei.org/wp-content/uploads/2024/07/Chinas-Global-Activity-Building-Grabs-the-Spotlight-from-Owning.pdf?x85095
There is a discrepancy between Peru´s official figures for Chinese investment in the country and the reality. According to PROINVERSIÓN data, at the end of 2023, the stock of Foreign Direct Investment (FDI) in Peru reached 30.171 billion dollars, with the United Kingdom and Spain as the main investors. China, with 1.139 billion dollars , ranked eighth (see Table 2). However, as explained above, this figure underestimates the actual investment from China in Peru.
Chinese companies have made significant investments in the Peruvian mining sector. A prime example is Las Bambas, where the investment reaches 10 billion dollars. This mine generates the equivalent of 1% of Peru's GDP and 2% of the world's copper production. In addition, Chinese companies dominate iron production in Peru (Shougang) and control just under 20% of copper production, mainly through Las Bambas and Toromocho (owned by Aluminum Corporation of China - CHINALCO).
In infrastructure, Chinese investment stands out in two sectors: One is the construction of a port in Chancay, a city located 55 km north of Lima, which will become the most modern in the South Pacific of Latin America, and where 60% is owned by the company COSCO Shipping Corporation (the company building the port, will manage it, and has its own shipping company, one of the largest in the world ). This project contemplates a total investment of more than 3 billion dollars . This port offers the possibility of Peru becoming the leading maritime cargo hub in the South Pacific . Thanks to this port, there will be a direct route from South America to Asia; that is why this route is said to be from "Chancay to Shanghai," and it will reduce cargo transit time by 10 to 15 days. .
For its part, China Three Gorges Corporation (CTG) and China Southern Power Grid International (CSGI), which belong to the same economic group, bought two companies in 2019 and 2023 that distribute electricity for Lima, the capital of Peru. In 2019, China Three Gorges Corporation (through its subsidiary, China Yangtze Power International) bought Sempra Energy's assets in Lima for about 3.59 billion dollars (Sempra is a United States company) This company owned Luz del Sur, which distributes energy to the southern part of Lima). And in 2023, China Southern Power Grid paid about 2.9 billion dollars for the operations of ENEL, an Italian company. This Chinese economic group has also bought other regional companies in this area in Peru. According to the newspaper Gestión, these two companies, CTG and CSGI, control 55% of the electricity distribution and 57% of the (regulated) sale of electricity nationwide. See Chart 5.
Chart 5: Chinese Companies' Participation in Electricity Distribution and Sale in Peru
Source: Diario Gestión, 6 de febrero del 2024, página 5
Since Peru joined the Chinese Belt and Road Initiative in 2019, it has experienced an increase in the participation of Chinese companies, particularly in infrastructure development. In addition, Peru is a member of the Asian Infrastructure Investment Bank (AIIB), to which it contributed 154.6 million dollars, the largest among Latin American countries. Of the six countries in the region that have contributed to the AIIB (Argentina, Brazil, Chile, Ecuador, Peru, and Uruguay), Peru contributes 84% of the total.
According to the aforementioned AEI study, most of the 31.83 billion dollars that China invested in Peru in the 2005-2024 period is in the mining sector, with 16.04 billion dollars, followed by energy, with 12.47 billion dollars, and thirdly, transport, with 2.01 billion dollars. See Chart 6.
Chart 6: Distribution of China's FDI in Peru by economic sector, 2005-2024
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Source: AEI: https://www.aei.org/china-global-investment-tracker/. See: Chinese Investments & Contracts in Peru (2005-2024)
On the other hand, Peru has received very little Official Development Assistance or loans from the Chinese government. Peru does not need these loans in particular, as it can access the international financial market without problems, unlike countries such as Venezuela, Ecuador, and Argentina, for example, which have large loans from China. According to data from the website The Dialogue, as of 2023, Peru have only one loan from China for an amount of 50 million dollars, from the China Development Bank, for the infrastructure sector, from the year 2009. See Chart 7.
Chart 7: Loans from China to Latin America and the Caribbean
Source: The Dialogue https://www.thedialogue.org/map_list/#:~:text=The%20Chinese%20Loans%20to%20Latin,lender%2C%20sector%2C%20and%20year.
With a view to the implementation of 5G technology in Peru, China is promoting the formation of human capital in this field. Huawei plays a key role in this initiative, through collaborations with universities such as the National University of San Marcos (UNMSM) and the National University of Engineering (UNI) . In June 2024, Huawei and UNMSM announced the creation of a technology training center. . In October of that same year, the first practice base for hardware installation in Latin America was installed at the Faculty of Systems and Informatics Engineering of UNMSM, under the supervision of university authorities and Huawei. .
It could be noted, as a sign of the good relations between UNMSM and China, that the University decided to award an Honorary Doctorate to President Xi Jinping, an award ceremony that would take place during the Chinese president's visit to Peru on the occasion of the APEC Leaders' Summit meeting in November 2024.
Relations between Peru and China extend to the academic field, where there is growing interaction. Many of the Peruvian academics and researchers who focus on China have been trained in that country, thanks to an increasing number of scholarships and opportunities to participate in conferences funded by China. Academic collaboration with Chinese institutions specializing in China studies is increasingly frequent.
In Peru, there are three Research Centers on Asia and China. The oldest is the Center for Oriental Studies of the Pontifical Catholic University of Peru, which began its activities in 1988. There is also the Center for China and Asia Pacific Studies of the Universidad del Pacífico, which was created in 2013 . Both universities are private. And there is the San Marcos Center for Asian Studies (CEAS), which was created in 2018 at the National University of San Marcos, which is a public university .
On the other hand, the presence of Confucius Institutes in Peru extends beyond the capital. In addition to the two located in Lima, there are two others in the interior of the country, one in the northern region and another in the southern region. It should be noted that all four Confucius Institutes are located in private universities.
III. Military and Security Relations
Peru has a very old and extensive security relationship with the United Sates. Many officers of the Peruvian Armed Forces are trained in the US, and much of the country's military weaponry comes from the North American giant. This trend is likely to continue in the future.
Currently, there is talk, for example, of Peru's acquisition of combat aircraft worth 3.5 billion dollars, a purchase of an amount that had not been made in years. And there is talk that one of the possible sources of supply for these aircraft is the US, with the F-16 as a strong candidate, along with the French Rafale or the Korean K-21. It is interesting to note that, given the existing geopolitical tensions and the scenario of the Russian invasion of Ukraine, Russia, which was an important source of supply for the Peruvian Air Force, would be out of place, and the US could once again be a major supplier of these weapons to Peru. .
Also, in recent years, joint military training between Peru and the US Armed Forces has increased. For example, in June of this year,2024, the US aircraft carrier George Washington was in Peru to participate in joint manoeuvres with the Peruvian Navy. .
On the other hand, on the security issue, the US and Peru are working on combating drug trafficking and crime. This implies US support in, for example, the eradication of illicit crops and the interception of drug shipments and chemical products used in their manufacture. .
China does not yet have a major presence as a supplier to the Peruvian armed forces. And the relationship between officers of both armed forces is still incipient, although it is increasing.
IV. Conclusions
In June of this year, 2024, during the visit of the President of Peru to China, the two countries signed some agreements, including the Joint Action Plan 2024-2029, which contemplates "cooperation in key areas such as the digital economy, scientific and technological innovation, and infrastructure." .
Also during that visit, the Peruvian-Chinese Business Council was formed. This entity, which brings together entrepreneurs from both countries, seeks, for example, "that the business communities of both countries can actively participate in infrastructure and development projects, including the Belt and Road Initiative." This council is made up of business associations such as the Association of Exporters (ADEX), the Lima Chamber of Commerce (CCL), the Peruvian Foreign Trade Society (ComexPeru), the Peruvian-Chinese Chamber of Commerce (Capechi), the National Society of Industries (SNI), and the China Council for the Promotion of International Trade (CCPIT).
Given the above, it is likely that the importance of China for Peru will increase, not only as mentioned before in trade but also in FDI, particularly in the country's infrastructure sector. And Peru, in particular, needs the construction of physical infrastructure and its modernization. For example, with the Chancay port, it will be possible to bring cargo from Bolivia and Brazil to go directly to China, but roads and railways are needed to connect Chancay with the borders of Brazil and Bolivia. China has an advantage in this field, as it has large railway and road construction companies and they are already present in Peru. It also has the technology and could build at lower costs and offer quite competitive financing compared to companies from other countries.
But as mentioned above, the US, with its allies such as the United Kingdom or other developed Western countries, will likely resort to government-to-government contracting schemes with the Peruvian government to participate in infrastructure construction, and thus compete with China.
In infrastructure, and ports where the US has expressed concern about China's presence in Peru, there is the possibility of building a much larger port than Chancay. In southern Peru, there is a place called Corio, where it is said that its coastal part has a deep of almost 28 meters, 10 meters greater than that of Chancay, which would allow larger ships to dock. It is also closer to the Southern Interoceanic Highway that connects Peru with Bolivia and Brazil. It is said that United States could invest there and thus compete with Chinese investment in Chancay . Although for the moment, the execution of this project is uncertain as it does not have permission from the National Port Authority, which for the third time rejected, at the beginning of October 2024, the technical feasibility of the port. .
Along with the Chancay port, there are plans to create a free zone or special economic zone. There is also the project of the Ancón special economic zone, a place on the coast between Lima and Chancay, with an area of 1,338 hectares. . Foreign investment is needed in those places, in addition to national investment. China is expected to invest there, and the US would be expected to do so as well.
Additionally, there is lithium in southern Peru, particularly in Puno. This metal is essential for renewable energy and electric vehicle industries, and many countries worldwide possess this metal. China, the country with the highest output of these energies and products, and consequently with the greatest need for lithium, is already present, exploiting this mineral in Bolivia, Chile, and Argentina, which make up the so-called lithium triangle. Competition for Peru's lithium is expected, although for the moment, the only lithium concession in the country is held by Macusani Yellowcake , owned by the Canadian company American Lithium.
Peru will have to decide soon which technology to adopt for its 5G telecommunications network. As can be seen, China is preparing, through Huawei, and training Peruvian technicians to handle this technology, Huawei's technology. The US has also recently begun to compete in this sector. Peruvian government's decision will have to be seen, and the US is expected to exert some pressure, as it has done in other countries, to prevent Chinese technology from being accepted.
October 19, 2024
* Carlos Aquino Rodriguez is the director of the Center for Asian Studies at the UNMSM. He is an economist. He studied his Master's and Doctorate at the University of Kobe, Japan. His specialty is international economics and Asian economics. He is also a translator of the Japanese language. He has been a visiting professor and researcher at universities in China, Japan, and Taiwan. He is regularly interviewed by various national and international media.
References
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