Chile has a very sweet port for China, Europe and the US. The problem is that it is tiny

The current crises in various parts of the world are causing countries to look for solutions. And if we talk about trade, those solutions must be found in new maritime routes. Most of the world’s trade moves by ship and in recent months there has been the perfect storm for countries and companies to look for new routes due to the blockage of the Suez and Panama canals.

In this storm, Chile has safe passage thanks to the Strait of Magellan, which was once a prosperous commercial route. And it is something that China and the United States are watching closely.

Punta Arenas. With the Houthi attacks on the Suez Canal and the drought of the Panama Canal, maritime trade is in a difficult situation. The secondary routes are not the most optimal and are causing saturation in some ports, such as Singapore (which traditionally has a lot of movement due to its cheap fuel and being a strategic point). In the middle of that storm is where Chile wants to fish with ports in Punta Arenas.

Between January and February of this year, traffic in the Strait of Magellan and the port of Punta Arenas has skyrocketed, being 25% higher than that of the same period in 2023. In fact, it is expected to continue increasing and it seems that The Navy is preparing for a possible increase of up to 70% this year. The reason? Apart from the commercial routes, saving a few kilometers compared to the route bordering South America (and money on fuel), it is a strategic location not only because it is a commercial route.

Traffic jam in the Strait of Magellan. This route is a ‘small’ interoceanic navigable passage with a length of 608 kilometers that allows passage from the Atlantic to the Pacific, and vice versa, leaving goods in the port of Punta Arenas that can be easily distributed to the rest of the area in South America. This is because it is the southernmost port in South America that is connected by land to the rest of the continent. Cape Horn is still on an island and the Big Island of Tierra del Fuego is connected by a ferry, so it is not viable as a strategic point.

The problem is that, in reality, the port of Punta Arenas is very small and with an increase in traffic, the Navy fears that incidents may occur. It seems that accidents are not frequent, but Chilean authorities state that “we can now cope with the increase in traffic, but if it continues, we will need to grow both in infrastructure and in personnel. “We will need more pilots, more people and more resources to better control traffic with patrol boats.”

You have to invest. The problem, as we mentioned, is that the port is small. Well, Chile actually needs to expand its infrastructure if it wants to be a key point in world trade. At the end of last year, President Gabriel Boric stated that they were going to kick off a plan to expand and build ports, something that includes an investment of 400 million dollars over five years to modernize structures in the Magallanes area. and also plans for Valparaíso.

In general, several areas of South America are modernizing their port structures to adapt them to the new reality, but the necessary investment is enormous. The regional development bank CAF stated in 2018 that Latin America and the Caribbean would need an injection of 55 billion dollars in port infrastructure by 2040. Mexico would have an investment of more than 12 billion (something logical considering its current importance as an intermediate point between China and the United States) and the investment forecasts in Panama (7,896 million dollars), Peru (5,519 million), Chile (5,109 million) or Colombia (4,840 million) are also notable. Ecuador with 2,728 million or Argentina with 1,419 million are somewhat further away.

China is moving chips. Who is not wasting their time is China. The Cosco Shipping company is planning to open a port in Chancay, Peru. An investment of 3.5 billion dollars that will serve to boost shipments from the Asian giant to Latin America, but it is not the only one. The Shaanxi Chemical Group company is already interested in creating a $1.25 billion port in Rio Grande and the entire area is filling up with Chinese fishing boats. So much so that the Argentine Navy is expanding a base in Ushuaia to monitor these activities.

Green hydrogen. Now, beyond commerce, the area is arousing interest for its potential to generate green hydrogen. It is one of the fashionable resources (in Spain, for example, the final plan for hydrogen corridors is already in place) because it can be one of the keys to the production of low-emission energy and the area seems ideal for manage to release this hydrogen for two reasons: low population and strong winds.

The region has already received about 16 proposals, most of them from European companies with projects for more than 3,600 wind turbines and a total of 25 GW to help achieve European independence from Russian gas. In addition, they are already considering making it a western access point to Antarctica, something that is attracting the attention of all countries (with the United States and China at the forefront) due to its wealth of mineral resources.

The environmental issue. What will determine the future of the region is how both old and new facilities will be managed to comply with contemporary environmental measures. There are already some facilities built before current environmental guidelines, so their situation will have to be reconsidered. For example, in Bahía Inútil there is a large colony of penguins and they must make sure not to influence their habitat too much.

In the end, it is the whiting that bites its tail: if you want to create such enormous wind plants, it is necessary to transport the material by sea, which is why large ports and infrastructure are needed, more personnel to control the Strait of Magellan and larger ports. and more modern both to receive goods and to export what is produced. And without investment, it will not be possible.

We will see what all this translates into, but the landscape and production may change radically in the region in a few years.

Image | Google Maps

In Xataka | There is a place where ships go to “die”: this is the huge cruise ship cemetery on the coast of Turkey