Alexandra Black | Latin America Fellow
Image sourced from President of Peru via Unsplash.
Peru’s Chancay Port marks a pivotal moment in the geopolitical landscape of Latin America. Inaugurated in November of 2024, the mega-port is the result of Peru and China’s burgeoning strategic partnership. Chancay will revolutionise trade connections between Latin America and the Indo-Pacific, reflecting a wider pattern of Chinese investment in the region.
Though touted as a “win-win” for development, China’s presence in Latin America brings risks and benefits. As Chinese economic involvement in the region expands, more Latin American countries will have to balance economic gains against safeguarding sovereignty, particularly amid the escalating United States (US)-China rivalry. Peru's strategic approach to Chancay will set a regional precedent, revealing the opportunities and risks of close ties with China. To avoid becoming a cautionary tale, Peru must prioritise long-term economic growth and maintain its independence in strategic decision-making.
An opportunity for growth
Since the early 2000s, China has expanded its presence in Latin America under the Belt and Road Initiative (BRI), and is currently the region’s second largest trade partner. China frames its investments and trade deals as based on “equality, mutual benefit, and shared development”. However, projects like Chancay are undoubtedly a response to China’s growing demand for Latin American commodities.
Majority owned by Chinese maritime conglomerate COSCO, Chancay has attracted USD$3.6 billion in investment. It boasts advanced technology and can accommodate the world’s largest container ships. Chancay’s strategic location on Peru’s Pacific coast will streamline shipping routes between Latin America and Asia, reducing dependence on North American ports.
Sentiment in Peru is optimistic. Peru’s Minister of Production has projected that Chancay will generate USD$4.5 billion in annual revenue and create over 8,000 jobs. The port is also set to be a “logistics hub” for neighboring countries like Brazil, Ecuador, and Chile, strengthening Peru’s political influence in the region. Chancay is thus set to bring significant strategic and economic advantages to Peru and the broader region.
Balancing the risks
However, foreign investment projects do not guarantee growth for Latin American countries. Chancay and similar projects will boost commodity exports, but risk deepening dependence on raw materials–a challenge many Latin American countries are already facing. In Peru, metals and mining contribute 9.5 per cent of the country’s GDP, while mineral exports make up 64 per cent of total exports. In turn, experts have warned that China’s partnerships in Latin America are reinforcing the region’s role as a commodity exporter, undermining industrialisation, diversification, and innovation. Such dependence limits long-term growth, exacerbates environmental degradation, and increases vulnerability to economic shocks.
Experts have also raised concerns over the political risks of BRI, highlighting that projects like Chancay may limit states’ capacity to prioritise their own domestic and global interests. This dynamic was evident in a dispute over COSCO’s exclusive rights to the use of Chancay, which Peru attributed to an “administrative error.” After COSCO allegedly threatened to withdraw from the project, Peru allowed the exclusivity rights to stand.
Finally, the project challenges the foothold of the US in Latin America. Washington has long viewed BRI as part of an expansionist strategy set to rival global US dominance. Concerns have already been raised by US military personnel regarding Chancay’s capacity to accommodate military warships. Navigating the US-China rivalry must be a key consideration for Peru and its neighbours moving forward.
What should Peru do next?
To avoid over-dependence on China, Peru must work pragmatically to create leverage wherever it can. Economic policies aimed at diversification and growth are an essential first step. While Peru faces several structural barriers to growth, attention must be given to the state’s human capital shortage, a problem shared by many Latin American countries. A skilled and educated workforce would help reduce the country’s highly informal economy, foster greater innovation and entrepreneurship, and drive economic diversification. Countries like Costa Rica have successfully used this strategy to transition to high-value exports and achieve stable growth.
Reducing dependence on commodity exports can mitigate economic coercion from China, but Peru ought to recognise the strategic value of its relationship with the US as well. As Latin America becomes a “key battleground” for influence between the two powers, Peru has a unique opportunity to work strategically with both. While incoming president Donald Trump’s drastic rhetoric and tariff threats are concerning, the US is undeniably under pressure to bolster foreign relations in Latin America. However, a hardline approach risks driving the region into further dependence with China.
Knowing this, Peru must work strategically and pursue policies that strengthen economic and security ties with the US, while highlighting the benefits of neutrality. The country must demonstrate that an independent Peru serves US interests far better than one over-reliant on a rival. However, this strategy must be supported by ensuring that returns from foreign investment are channeled into inclusive growth and public priorities, including economic diversification, infrastructure and education.
For Peru, time is of the essence. With China’s influence growing and the US renewing its focus on the region, the government must be bold and adopt a strategy that fosters growth while safeguarding independence. With other Latin American nations set to benefit from increased foreign investment, Peru has the opportunity to set an example and demonstrate that countries in the region can gain from Chinese investment while advancing their own vision of development and foreign relations.
Alexandra Black is the Latin America Fellow for Young Australians in International Affairs. She holds a Bachelor of Public Policy from the Australian National University, with minors in Development Studies and Spanish Language. Alexandra’s interest in Latin America is driven by her Peruvian heritage and experience living and working in the region. As a fellow, she is eager to raise awareness about social, economic, and political developments in Latin America.