The FDI angle:

• UAE's DP World invested $400m to upgrade its terminal in the port of Callao in Lima, Peru. 
• Why it matters: The Pacific coast of South America is receiving growing levels of investment in port infrastructure to accommodate rising demand for trade with Asia, particularly China, which is now Peru's largest single trade partner. 

China’s rising demand for food and other raw materials has changed the trajectory of Peru as a trade hub, prompting United Arab Emirate’s port powerhouse DP World to invest $400m to almost double the capacity of its terminal in the port of Callao, Lima.

“Over the past 10 years, Peru has become a major exporter of ‘superfood’ like blueberries, grapes, avocado and citrus,” Carlos Merino, CEO of DP World in Peru and Ecuador, tells fDi Intelligence. “Combined with fish and minerals, that has contributed to generating a strong throughput for ports like Callao and is part of the success of the country as an exporter.” 

Peru’s foreign trade with China has gone through the roof since the free trade agreement between the two countries came into force in 2010. Back then, the US was the country’s largest trade partner, with China coming in as close second. Fast forward to 2022, the roles have swapped, with China becoming the country’s largest trade partner, generating 60% more trade than the second-placed US. 

Looking forward, “Asia will remain the main driver for growth for sure, with China in particular being very important in this part of the world,” Mr Merino says.  

DP World’s upgrade of the Muelle Bicentenario terminal in the port of Callao in Lima, which was officially inaugurated on June 20, substantiates its buoyant expectations for Peru’s foreign trade outlook. The expansion, which cost a total of $400m, increased the terminal’s handling capacity from 1.5m TEUs (twenty-foot equivalent units) per year to 2.7m TEUs, while the container yard space has also been expanded to a total of 40 hectares. The port handled 1.6m TEUs in 2023, and Mr Merino now expects it to reach 2m TEUs in 2024. 

CALLAO'S MUELLE BICENTENARIO TERMINAL EXPANSION: 

• Company: DP World
• Location: Lima, Peru
• Investment:$400m
• Total upgraded capacity: 2.7m TEUs
• Inauguration date: June 20, 2024

According to the World Bank’s latest Container Port Performance Index 2023, the port of Callao, which includes a total of five terminals featuring DP World's Muelle Bicentenario, as well as other terminals operated by APM Terminals and Transportadora Callao, was the second best performing port in the whole of Latin America after the port of Cartagena in Colombia. 

The role of China as Peru’s largest trade partner may prove a double-edged sword for the Port of Callao, though. To accommodate fast-growing China-Peru trade flows, the biggest Chinese shipping company, Cosco, decided to take things in its hands with the construction of a brand-new port in Chancay, 80km north of Lima. The $1.3bn port, which is expected to come online later this year, will have the capacity to handle 1.5m TEUs and 6m tonnes of general cargo per year. 

Mr Merino believes there will be space for both ports moving forward. 

“I think the port of Chancy is going to be useful for cargos like solid bulk and ro-ro [wheeled vehicles]. But it’s a young port of containers, it has yet to prove its connectivity and relationship with clients.” 

China’s grip on critical infrastructure in Peru across sectors like ports, energy, and mining has raised a few eyebrows in Washington, with US officials worried about the country slipping under Beijing’s sphere of influence. 

“Chinese firms are being very aggressive,” confirmed minister foreign trade minister Juan Carlos Mathews in an interview with fDi Intelligence in January. 

From DP World’s perspective, Mr Merino acknowledges the current geopolitical issues, but also highlights that “there is no alternative [in terms of trade growth and volumes] to the Chinese market”. 

“We see growth coming from Asia and China. Ultimately, we want to be pragmatic when it comes to trade.”

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