China's plan to strengthen its trade foothold in South America with the construction of the Chancay mega-port in Peru has hit a snag. Peru signed an agreement with Cosco Shipping Ports for the Port of Chancay, but an 'administrative error' has given Cosco exclusivity over operations. The Chinese company now has 60% ownership of the port and has invested $3.5 billion in the project. The Peruvian government is trying to rescind the exclusivity clause, as other governments should be cautious about Chinese infrastructure investments. Chinese firms have invested in ports outside China, including in Europe and Australia, raising security concerns about Chinese control of strategic ports. Many countries' enthusiasm for China has waned, and strategic sense should prevail when negotiating deals with Chinese companies [f524222c].
The Peruvian government is now learning the importance of reading the fine print in deals with China. The exclusivity clause in the agreement with Cosco Shipping Ports was an 'administrative error' that has given the Chinese company control over operations at the Port of Chancay. Cosco now has 60% ownership of the port and has invested $3.5 billion in the project. The Peruvian government is attempting to rescind the exclusivity clause, but the situation highlights the need for caution when entering into infrastructure deals with Chinese companies. Chinese firms have been investing in ports around the world, including in Europe and Australia, raising concerns about security and control. Many countries have become more wary of Chinese investments, and it is important to approach negotiations with Chinese companies with a focus on strategic interests [f524222c].
The situation in Peru serves as a cautionary tale for other countries considering infrastructure deals with China. The exclusivity clause in the agreement with Cosco Shipping Ports has given the Chinese company significant control over operations at the Port of Chancay. Cosco now owns 60% of the port and has invested $3.5 billion in the project. The Peruvian government is now trying to undo the exclusivity clause, but the incident highlights the need for careful consideration when entering into agreements with Chinese firms. Chinese companies have been investing in ports worldwide, raising concerns about security and control. Many countries have become more skeptical of Chinese investments, and it is crucial to approach negotiations with Chinese companies with a focus on national interests and strategic considerations [f524222c].
In a separate development, parts of a new agreement between Iran and India to develop the port of Chabahar have been made confidential to avoid problems caused by US sanctions. The head of Iran's Ports and Maritime Organization, Ali Akbar Safaei, stated that while the contract with the Indian operator is not confidential, certain aspects of it have been kept secret. This decision was made to prevent India from coming under pressure from the US if details of the contract were disclosed. The deal, signed in May, allows the India Ports Global (IPGL) company to develop and control Chabahar for 10 years. Chabahar is Iran's only ocean port and is considered a major trade link between the Indian Ocean and landlocked countries in Central Asia. India aims to develop Chabahar as a rival to the Chinese-funded ports in Pakistan. The IPGL has already invested $85 million in gantry cranes in Chabahar and the new agreement raises the Indian side's investment value to $370 million. Iran has plans to develop other terminals in Chabahar and has invested hundreds of millions in building a railway between the port and the provincial capital of Zahedan near the Afghan border. India obtained a US sanctions waiver in 2018 to work in Chabahar [3a55551b].