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Chinese presence has grown rapidly in South America

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Xi expected to attend APEC summit in Lima

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China ahead of US on trade with Peru

By Marco Aquino and Eduardo Baptista

LIMA/BEIJING, Nov 11 (Reuters) - In South American

copper giant Peru, the incoming Donald Trump White House will

find itself already on the losing side in a trade battle with

China, part of a bigger power realignment around the

resource-rich region in Washington's backyard.

Peru, the world's no. 2 copper exporter, is set to host

Asia-Pacific Economic Cooperation leaders this week, with

China's President Xi Jinping expected to attend and inaugurate a

major new Chinese-built port in the country. Outgoing U.S.

President Joe Biden is also on the guest list.

Peru reflects a wider challenge for the White House around

South America, where China's presence has grown rapidly given

its huge appetite for the region's main exports: corn, copper,

soy, beef and battery-metal lithium.

That's made Beijing the go-to trade partner from Brazil to

Chile and Argentina, eroding Washington's regional political

clout, a trend that widened under Trump's 'America First' inward

turn during his first administration and again under Biden.

"The strategic value is that this is the United States'

backyard," said Li Xing, professor at the Guangdong Institute

for International Strategies, adding it helped counter U.S.

presence around the Indo-Pacific and offset trade war risks.

"China can't start by building military bases there

because it's too sensitive and will make China's conflict with

the United States too pronounced... So it has made inroads with

economic ties first."

Peru demonstrates the dramatic shift. China's trade lead

there over the United States widened to $16.3 billion last year,

UN Comtrade data show, a stark reversal of just a decade ago

when Washington was the dominant player. That's come

hand-in-hand with investment from energy to mining.

China overtook the United States in 2015 on trade with Peru,

widening the gap under Trump's previous administration from

2017-2021, and again under Biden.

"China has entered the region aggressively, is learning

quickly, and is prepared to remain for the long term," said Eric

Farnsworth, a former State Department official now at the

Council of the Americas and Americas Society.

"Unless the United States meaningfully prioritizes regional

economic policy in a new and more effective way, the region will

continue to tilt toward Chinese interests."

The U.S. embassy in Lima did not respond to a request

for comment. Washington officials have repeatedly warned

publicly that Chinese investment in the region comes with

strings attached and said the United States is a more reliable

partner.

'SINGAPORE OF LATIN AMERICA'

A beacon of the change is a new megaport 80 kilometers (50

miles) north of Lima in Chancay. It is being built by China's

state-owned Cosco Shipping and promises to shorten sea

routes to Asia both for Peruvian and Brazilian goods.

The Chinese-controlled port, set to be inaugurated by Xi

when he is in Peru, has sparked concern from the United States

over regional security, but more importantly will turbocharge

the region's trade highway to China.

"We will have direct routes to Asia, particularly to ports

in China, which will be cut by 10, 15, 20 days depending on the

route," Peruvian Minister of Transport and Communications, Raul

Perez Reyes, told Reuters at the port.

He added that it would compete with Mexico's Port of

Manzanillo and eventually Long Beach in California.

"Our aim is to become the Singapore of Latin America."

The Pacific coast port is leading to other investments to

boost connectivity, especially for soy producers in Brazil, who

are keen to cut down shipping costs and travel time to Asia, and

avoid going through the Panama Canal to the north. Peru's

government is pushing a potential $10 billion rail project.

That could see more Brazilian soy transported overland to

Peru and then heading for China. Brazil has seen trade with the

world's no. 2 economy skyrocket in recent years.

Most local officials and diplomats, however, strike a

cautious tone. They say both China and the United States are key

partners. But privately, they concede that China has given more

concrete attention to Latin America.

"Peru is open to do business with all countries," said a

senior Peruvian official on condition of anonymity. "What China

does though is concentrate its investments in Latin America and

Africa" which have the resources it needs, the official said.

He added that Peru hoped to sign an agreement during APEC

with China to upgrade their 2009 free trade agreement, mainly

related to intellectual property, electronic commerce and

customs procedures.

'SIGNALS OF ENTHUSIASM'

Brazil's ambassador in Lima, Clemente Baena Soares, said the

Chancay port would be a major boost for his country's soybean

farmers, cutting almost in half journey times to Asia.

He called for Peru to ease red tape for Brazilian haulers

such as load limits on highways linking the countries.

Jose Tam, president of the Peru-China Chamber of Commerce,

said that China was being more proactive than others in South

America, helping boost its trade and investment ties.

"China is sending the clearest signals of enthusiasm in the

region," said Tam, who heads the association that includes large

copper mines such as MMG Ltd's ( MMLTF ) Las Bambas and Aluminum

Corp's Chinalco.

Mario de las Casas, corporate affairs manager for Cosco

Shipping, said Peru's pivot towards China wasn't political and

it was open to investors from everywhere. The trend was purely

business, with less U.S. investment on offer.

"Let the United States come to invest, it has not done so

for many years," he said, adding that Peru was well positioned

to benefit from any global trade tensions. "Here there are no

good or bad guys, here there are only interests."