Puerto de Chancay: a Chinese Trojan Horse?

On November 14, during the APEC annual meeting in Peru, China unveiled one of its most significant undertakings in the Americas under its Belt and Road Initiative (BRI): the Port of Chancay. This development represents a game-changer for trade in the region, altering economic dynamics and geopolitical realities in a part of the world historically dominated by U.S. influence.

Introduction

The Port of Chancay is situated 80 kilometers north of Lima, Peru, and is poised to become one of the largest and most strategically significant ports on the Pacific coast of South America. This project, with a 60% ownership stake held by China’s state-owned COSCO Shipping Corporation, aims to streamline trade routes between South America and Asia. By bypassing northern ports traditionally aligned with U.S. influence, such as those in Manzanillo, Mexico, or Los Angeles, the port promises to drastically cut shipping times.

For instance, a shipment of wood from Ecuador could now be directly exported to China via Chancay, avoiding the delays and detours of transiting through the north. However, this new capability is not just an economic boon—it also grants China unprecedented control over trade in the region. COSCO’s involvement has raised concerns about the port being leveraged for geopolitical influence, particularly as Chancay becomes a vital link in China’s broader strategy to reshape global trade routes.

Source: CIA

Why is the Chancay Port important?

The importance of Chancay Port lies in the strategic interests of both Peru and China. For Peru, the port represents an opportunity to break free from reliance on intermediary ports controlled by U.S. allies, allowing direct trade with Asia. This independence is especially valuable for the export of agricultural products such as fruits and vegetables, as well as minerals like copper, zinc, and silver. Notably, the mining company Volcan, which holds a 40% stake in the port, specializes in these exports. With recent ownership changes shifting Volcan from Glencore to Argentina’s Integra Capital, the port is positioned as a vital economic asset for regional growth.

Chancay also promises to enhance Peru’s role as a regional trade hub, potentially drawing Brazilian exporters who currently rely on longer and costlier routes via the Cape of Good Hope. Improved terrestrial connections between Peru and its neighbors could make Chancay a critical node in South America’s logistics network.

For China, Chancay is part of a broader effort to secure supply chains and expand its Belt and Road footprint into South America, a region that has long been under U.S. influence. The port allows China to vertically integrate its supply chains for minerals and agricultural products, essential for sustaining its industrial base. Strategically, Chancay also complements COSCO’s only other port in the Americas, located in Seattle, giving China a stronger foothold in the hemisphere and enabling it to challenge trade routes historically dominated by U.S.-aligned entities.

The Trojan Horse Aspect: Financing and Legal Concerns

While the Port of Chancay promises economic benefits, it has sparked significant controversy. Concerns about “debt trap diplomacy” loom large, with critics warning that Peru’s reliance on Chinese financing could leave it vulnerable. If debts are not repaid, COSCO could assume even greater control over the port, a scenario reminiscent of Sri Lanka’s Hambantota Port.

Legal issues have also plagued the project. In 2021, Peru’s National Port Authority granted COSCO exclusive rights to operate the port’s essential services—a decision later admitted to be an administrative error. Despite ongoing legal challenges and accusations of anti-competitive practices, a new law passed in 2024 legitimized the exclusivity, raising questions about transparency and governance. Such developments have fueled concerns that the port could become a de facto Chinese enclave within Peruvian territory if not carefully managed.

Case Study: The Hambantota Port in Sri Lanka

The risks associated with Chancay are underscored by the experience of Sri Lanka, which leased its Hambantota Port to China for 99 years after failing to repay its debts. Since then, the port has hosted Chinese surveillance vessels, raising alarms about its potential use for non-commercial purposes. Although China has denied allegations of military activity, the mere presence of such vessels has heightened tensions in the region.

Chancay Port could face a similar trajectory if Peru fails to maintain control over its operations. Without stringent oversight, the port might transition from an economic asset to a geopolitical liability, allowing China to extend its influence deeper into South America.

Chancay Port Capabilities and Strategic Importance

Chancay Port boasts impressive capabilities that underscore its strategic importance. Designed to accommodate ultra-large container vessels, the port is equipped with state-of-the-art facilities, including deep-water berths capable of handling high volumes of containerized goods and bulk exports. In its initial phase, Chancay is expected to process over one million TEUs (twenty-foot equivalent units) annually, with future expansions planned to meet rising demand.

These capabilities position Chancay as a critical hub for South American trade with Asia, especially for exports of minerals and agricultural products. However, the port’s potential utility is not limited to commerce. The U.S. Southern Command has highlighted concerns that Chancay could theoretically be used as a base for Chinese naval operations, given its deep-water design and strategic location. This possibility raises questions about the port’s long-term implications for regional security and sovereignty.

The Port of Chancay’s inauguration has brought to light broader geopolitical and environmental concerns. China’s history of maritime activities in South America, including alleged violations of Exclusive Economic Zones (EEZs) in Ecuador and Peru, raises fears that increased shipping activity from Chancay could threaten the region’s marine biodiversity.

The Port of Chancay represents a significant milestone in China’s Belt and Road Initiative, bringing both opportunities and challenges to Peru and the wider region. While the port promises to enhance trade and economic development, its strategic implications cannot be ignored. COSCO’s role as an extension of the Chinese state raises legitimate concerns about sovereignty, transparency, and security.

Peru must carefully navigate this partnership, ensuring that Chancay remains a commercial asset rather than a geopolitical pawn. By maintaining strong oversight and safeguarding national interests, Peru can maximize the port’s economic potential while mitigating the risks of overdependence on China.