Project financing contributes for a new port hub in the region  

China and Peru share a common history of high civilizations dating back millennia. Soon they will have a new port linking their futures.  

China’s Cosco Shipping Ports, one of the world’s largest shipping companies, and Peru’s Volcan Mining are building a new multipurpose port in Chancay, just shy of 70 kilometers north of Lima’s Peru’s capital.  

The $3.6 billion Port of Chancay is Latin America’s first greenfield port in decades and will change the nature of cargo transportation between China and Peru, as well as other countries along the region’s Pacific coast and farther afield.  

The new port “will be a gateway between South America and Asia,” according to Mario de las Casas, head of institutional affairs for Cosco Shipping in Peru.  

The financing, which represents the largest port financing in Peru’s history and one of the largest project financings in the country’s recent history, was highly complex with negotiations ongoing for more than three years between parties in China, Hong Kong and Peru. 

A $975 million syndicated loan facility for the port’s construction, which wins the award for Port Financing of the Year, closed in March 2023 after protracted negotiations with Chinese institutions, including Bank of China, the lead bank, and Bank of Communications, China Minsheng Banking Corp., Shanghai Pilot Free Trade Zone Branch, and Shanghai Rural Commercial Bank. 

“This was a highly complex transaction for several reasons, including the fact that it is first private port for public use in Peru,” says Alfonso Rebaza, legal manager at Volcan, a subsidiary of global mineral trader, Glencore.  

“It took us time to reach a conclusion, because many of the participants were unfamiliar with Peru and Volcan. While it may seem like standard financing architecture, it required intense cooperation between Peru and China.”  

The deal includes a highly tailored collateral package, covering shares of Cosco Shipping Ports Chancay, an all-assets pledge, an accounts pledge, land and concession mortgage, and direct agreements with project contractors. 

The new port is located on 141 hectares on either side of the Pan-American Highway, which runs from North America to the southern tip of the continent. It will initially have four berths, two for bulk, general cargo and two for containers. It will be the region’s most modern facility for loading, unloading and transferring containers.  

José Luis Bonifaz, a professor at Peru’s University of the Pacific who specializes in infrastructure, says the port will be a game-changer for Peru and the region, with Chinese mega-ships being able to transfer containers to smaller vessels that will service other ports.  

He says it will also make Peru a maritime powerhouse, with Chancay complementing the existing infrastructure at the nearby Port of Callao. Dubai’s DP World and the Dutch APM Terminals operate berths in Callao.  

“I think the Port of Chancay is going to have a huge impact on Peru and South America in the years to come,” he says.   

Rebaza says the Chancay-Callao hub “presents an interesting dynamic. We are very aware of the impact that this is going to have on the country and the region, creating synergies with neighboring countries and ports around the region.”