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Monday, 29 June 2015

Chinese backed Brazil-Peru rail link to boost sea trade

A proposed $10 billion rail link connecting Brazil’s Atlantic seaboard with Peru may cut costs for shipments between Brazil and China as much as $30 a tonne and is expected to increase sea trade in both Latin American countries, according to Brazilian officials.

The “Twin Ocean Railroad” or “Trans-Amazonian_Railway” project has been heavily backed by China, with Chinese Premier Li Keqiang commissioning feasibility studies into the route as part of a state visit to Brazil last month.

"A revolutionary change is occurring which will leave China an indomitable player in Latin America,” Thomas David Alvarez, Research Associate at the Council on Hemispheric Affairs said.

 “Chinese experts have determined that a more economically and diplomatically viable option is to avoid the Canal all together and instead ship all South American exports from a Pacific Ocean location."

The railway aims to connect the Brazilian ports of Açu and Santos on the Atlantic with Peru’s Puerto Ilo on the Pacific Ocean via round 5,300 km of tracks.

The Port of Santos is one of the largest hubs in the country and a key focus for Chinese officials keen to tap into Brazil’s resource heavy export markets.

Earlier this year Brazilian president Dilma Rousseff announced a wide-ranging $65 billion infrastructure package that included almost $12 billion in port construction and upgrades and $28 billion for railways.

The ambitious plans were announced as part of a push by the government to “revive economic growth” as the country’s economy has flat-lined and foreign investment has been weaker than expected following several high level corruption scandals.

Peru is also expected to benefit from the proposed rail link as the project promises to bring large scale investment to the country’s port infrastructure. Peru is heavily dependent on its ports for trade with an estimated 71.8% of exports shipped by sea, according to Peru’s Exporters Association (Adex). 

Peru’s main hub the Port of Callao to the west of the capital Lima has faced strikes in recent months which have ground operations to a halt. Logistics firm APM Terminals which runs a terminal at the site claims that efforts to fire known drug traffickers from amongst its workforce has led to disgruntlement and fuelled the ongoing strike at the port.

 

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