Last week’s visit to Peru by Chinese Prime Minister Li Kiquang once again highlighted the importance of bilateral relations with China. China has not only become Peru’s top export market but also its main foreign investor. Some 30% of the investment officially scheduled in the mining industry is from China, and China has also become the key to Peru’s strong economic growth record in recent years. No surprise then, that Li – on a tour that also took in Brazil, Colombia and Chile – was given a warm welcome.

However, China’s interest in Peru is not without its dangers.

Among the projects discussed by Li, both in Lima and Brazil, was the possible construction of an inter-oceanic rail link between Peruvian ports on the Pacific and Brazilian ports on the Atlantic. The route that was apparently discussed would link to the northern port of Bayovar in Piura region to the port of Acu in Rio de Janeiro state. On the Peruvian side the link would pass through Jaén, Chachapoyas, Tarapoto, Tingo María and Pucallpa.
http://larepublica.pe/impresa/economia/1973-asi-sera-el-recorrido-del-tren-bioceanico

Another possible option would be to drive a railway through the Amazon jungle through the Madre de Dios region in Peru and Acre state in Brazil. Either way such a project would have major implications, both social and environmental, for communities living along the proposed route.

Existing Chinese mining projects are already at the centre of controversy in Peru. Las Bambas in Apurímac and Río Blanco (Majaz) in Piura are the centre of disputes with local communities. Río Blanco, where the concession is owned by Zijin, has so far failed to make headway in view of the determined opposition by communities in the highlands of Piura to mining development there. The project was previously the focus of a bitter dispute with Monterrico Metals, the UK-based junior, and local communities.

Perhaps of longer term concern is that the pattern of extractive-led development encouraged by China will just reinforce Peru’s position in the global economy as a producer of bulk minerals and an importer of manufactured goods from China and elsewhere. As well as reinforcing Peru’s dependence on highly volatile commodity prices, this will do little to help the country to develop industries capable of producing value-added, improve on its woefully low levels of productivity, and provide an economic model that is capable of generating decent levels of employment in a country in which 70% of the workforce labours in the informal sector.

All that glitters is not necessarily gold.