China-backed Chancay megaport in Peru
China-backed Chancay megaport rises behind residential neighborhoods near Lima, Peru. The facility is located less than 50 miles from Callao, where the U.S. is funding naval infrastructure modernization. Getty Images

The United States has committed $4.5 million to help modernize Peru's main port at Callao, less than 50 miles from a $1.3 billion Chinese-controlled megaport, bringing Washington's competition with Beijing into one of South America's most important maritime trade corridors.

The funding, disclosed by the State Department on Thursday, will pay for the design phase of an infrastructure program at Callao, where Peru plans to relocate its main naval base to make room for expanded commercial operations. The move comes as China's state-owned Cosco Shipping strengthens its presence at the nearby Chancay port, which has established direct shipping connections between South America and Asia.

The two ports sit along the same stretch of Peru's Pacific coastline, but their significance extends beyond cargo shipments. Washington has raised concerns about Chinese influence over critical infrastructure in Latin America, while Beijing has accused the United States of interfering in the region's economic relationships.

The latest U.S. commitment was announced following a Nov. 1–7 visit to Peru and Colombia by Thomas DiNanno, the State Department's undersecretary for arms control and international security.

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According to a State Department statement issued Thursday, the $4.5 million came from previously allocated Foreign Military Financing funds. DiNanno visited the port infrastructure project during his trip and met Peruvian officials to discuss military cooperation and regional security.

The funding follows a much larger proposal announced in January, when Washington approved a potential $1.5 billion sale of engineering, construction and logistical services to Peru for the relocation and modernization of the Callao naval base.

The Defense Security Cooperation Agency said the proposed sale would include engineering studies, construction management, maritime facilities and technical support. Up to 20 American government or contractor representatives could be assigned to Peru for as long as 10 years to oversee implementation.

The $1.5 billion figure represents the maximum estimated value of a possible sale requested by Peru, not an amount Washington has committed to spend or provide as aid. The agency said the final value would depend on negotiations and Peru's requirements.

The project is intended to separate naval and civilian operations, allowing Callao's commercial facilities to expand while providing the Peruvian Navy with updated infrastructure.

Callao is already the country's busiest commercial port, handling cargo for Peru's domestic economy and international trade. However, it faces growing competition from Chancay, approximately 80 kilometers north of Lima.

The Chinese-controlled deepwater port was inaugurated in November 2024 and began commercial operations in June 2025. Built at a reported cost of $1.3 billion, it is majority-owned by Cosco Shipping Ports and forms part of China's Belt and Road Initiative.

Chancay offers direct connections to Asian markets, including Shanghai, reducing shipping times between Peru and China to approximately 23 days. Its operators have promoted the terminal as a gateway for agricultural products, minerals and manufactured goods moving between Asia and South America.

The port handled more than 500,000 twenty-foot equivalent containers during its first year of commercial operations, according to figures reported by maritime industry publication Seatrade Maritime.

The growth has continued in 2026. Between January and July, Chancay handled approximately 246,000 containers, an increase of 74% compared with the corresponding period a year earlier, according to figures cited by Peruvian business newspaper Gestión.

Callao remained substantially larger, handling approximately 1.9 million containers during the same seven-month period.

The figures illustrate why the competition matters commercially. Chancay is expanding rapidly, but Callao remains the established gateway for much of Peru's trade. Both ports are seeking a larger share of shipping traffic connecting South America with Asian markets.

The rivalry has also taken on a political dimension. In February, Washington warned that Peru risked losing effective oversight of Chancay after a court ruling restricted the country's transport regulator from supervising certain operations at the Chinese-controlled terminal.

The State Department accused the port's owners of undermining Peruvian sovereignty, prompting a sharp response from Beijing.

China rejected the allegations and defended its investments in Peru, while Cosco maintained that the ruling did not remove the authority of Peruvian customs, police and environmental agencies.

Peru's port regulator, Ositran, announced plans to appeal the decision, arguing that the ruling created an exception to the regulatory framework applied to other major ports.

The disagreement highlighted a broader concern in Washington over Chinese ownership and operation of strategically important infrastructure.

American officials have previously warned about the potential military applications of Chinese-operated commercial ports, although Peru has maintained that Chancay is a commercial facility. No evidence has been established that the port is operating as a Chinese military base.

The commercial relationship between China and Peru also complicates Washington's efforts to expand its influence.

China is Peru's largest trading partner and a major buyer of its mineral exports, particularly copper. Chinese companies have invested heavily in mining, electricity and transport infrastructure, making Beijing an important economic partner for Lima.

Peruvian President Keiko Fujimori has sought closer security cooperation with Washington while maintaining the country's economic relationship with China.

During Secretary of State Marco Rubio's September visit to Lima, the two governments discussed infrastructure, security and Chinese investment. Beijing subsequently rejected American criticism of its projects, arguing that Peru should not be forced to choose between major powers.

The latest funding comes alongside other U.S. security assistance for Peru. DiNanno also announced $20 million in financing for F-16 aerial refueling capabilities and $1 million in technical assistance for potential small nuclear reactor projects.

The Callao project will involve relocating and modernizing Peru's naval facilities to free up space for commercial port operations. Washington had earlier approved a potential $1.5 billion sale of engineering and construction services for the project, although the final value has yet to be determined.

China's Cosco Shipping, meanwhile, continues to operate the nearby Chancay megaport, which has established direct shipping routes to Asia. The two facilities are less than 50 miles apart, with Callao remaining Peru's largest commercial port.

The U.S. has also increased its focus on Latin America, including through infrastructure investments and security cooperation.