This article was originally published by Pacific Forum. It is republished with permission.
China has emerged as an economic and strategic competitor of the United States in South America.
As part of the Belt and Road Initiative, China has funneled $1.3 billion into the new Peruvian Port of Chancay, a deepwater facility that became fully operational in November 2024. The port will deepen the trade relationship between South America and China, the region’s largest trade partner, and will reorient Pacific shipping networks away from US port infrastructure.
It will further elevate China as not only the region’s largest trading partner, but as a powerful actor with leverage over local infrastructure and trade at a time when the US has stepped back from free trade institutions and has increasingly isolated itself from the region.
North of Lima, the Port of Chancay is the first South American port on the continent’s West Coast with the capability to receive ultra large container vessels (UCLVs). With majority ownership (60%) held by the Chinese state-owned conglomerate COSCO shipping, the port has unlocked a new major transpacific shipping channel between China and South America that bypasses the traditional deepwater ports in the US and Mexico.
Before the construction of the Port of Chancay, no deepwater port along South America’s West Coast could handle UCLVs, which carry 18,000 to 24,000 shipping containers and require a port of at least 16-17 meters of depth.
Previously, these massive cargo ships had to travel north to Mexico’s Port of Lázaro Cárdenas or US ports of Los Angeles, Long Beach, and Oakland. This created a logistical dependency on these ports, as they served as a critical transshipment connection for UCLV cargo processing for South American trade. From there, goods would be reloaded onto smaller ships that would travel to smaller South American ports.
Chancay effectively eliminates this costly and inefficient detour. When Chinese goods pass through US transshipment ports, the US retains a degree of logistical control and visibility over the flow of goods. Chancay bypasses that system entirely, reducing US insight over Chinese trade into South America. The transition has already begun. In April, China announced its first major shipping lane from its southern port of Guangzhou directly to Chancay, which will now circumvent North American ports.
Chancay was expected to process 1-1.5 million shipping containers in its first year alone, with full capacity in the next several years estimated to reach 3.5 million.
While this is substantially less than the 9 million and 10 million containers handled by Long Beach and Los Angeles, respectively, it may significantly divert trade away from US ports. It also foreshadows the increasing likelihood of frequent traffic from other Chinese ports, such as Shanghai, the largest in the world, into Chancay and away from North America.
As the US becomes sidelined in the Pacific trade routes, South American countries are becoming more dependent on China through deepening trade ties and infrastructure integration.
The new corridor will shave 10 days off the 35-day trip between China and Peru, which is expected to slash costs by up to 20%.
Through the utilization of on-site technologies, such as fully autonomous cranes, which can increase port productivity by up to 50% compared to other deepwater ports, China is innovating new ways to reduce costs and shipping times.
In the last year alone, trade between Peru and China surged by 15%, with neighboring countries reflecting similar upward trajectories.
Elsewhere in Latin America, China seeks to capitalize on Ecuador’s exports of fresh fruit and seafood.
Despite China’s position as Ecuador’s top trading partner, only 3-4% of the country’s 346 million boxes of bananas – its top export – were shipped to the country last year. This was due to lengthy transit times and high refrigeration costs that made the distribution of perishable goods minimally profitable.
Through this new route, banana exports to China are expected to triple, as reduced costs allow Ecuador to compete with Vietnamese bananas, which previously were up to 41 times cheaper.
This growing relationship will help Ecuado, already China’s leading shrimp supplier, increase the $3 billion worth of seafood it now sends annually. Ecuador gains from Chancay an opportunity to extend the shelf life and minimize the costs of its Asian exports.
Other countries, such as Bolivia, are also clambering to redirect their exports through Chancay. Days after the opening of Chancay, Bolivia signed a multibillion-dollar mining deal to increase output of lithium. Mineral exports that previously took costly routes overland to ports in Chile, to be shipped through the US, will now have the capability to filter toward the Port of Chancay and directly to China.
It reinforces China’s influence over the US in the global mineral supply chain and enables more efficient and direct delivery of these critical resources to its domestic market.
The port has positioned Peru as the focal point of Chinese trade with South America. In the same way that the US or Mexico was the facilitator of trade between China and South America, Peru will now grow into that role, serving as a transshipment hub for its neighbors. The region will grow increasingly dependent on Peru, both to dispatch smaller feeder vessels and to move cargo inland.
The acceleration of Chinese influence has been assisted in part by the Trump administration’s decision to implement tariffs, which pushes the region closer to China. Currently, with close to half of South American countries receiving special tariff rates between 15 and 50%, and the other half operating on the baseline 10%, trade with the US is expected to decline, particularly in areas such as beef and coffee.
On the other hand, China has implemented free trade agreements with its major trading partners in the region, including Chile, Ecuador and Peru, which in turn are expected to increasingly turn to China as a facilitator of free trade. The greater the Chinese influence on these countries, the more it can steer them away from US initiatives.
The American response to these deepening ties has proven insufficient, as the US has simply not offered any level of investment in hard infrastructure that comes close to that of China.
Despite having been approached for investment in other Peruvian ports, such as the southern port of Corio, the US has been unwilling to provide upfront financial guarantees. While handing out repeated warnings to South American countries through the State Department urging, “the importance of adequate oversight, security, regulation and fair competition for all key infrastructure projects,” the US is offering South American governments few financial alternatives.
The growth of Chinese economic investment has deepened its connection with China while the US can offer little but cautionary rhetoric.
The Port of Chancay is the product of growing Chinese influence across South America. The port will spur greater Chinese leverage over trade and infrastructure – further sidelining the US, which has continued steadfastly down a path of increased isolationism.
The US must re-engage the region economically, since rhetoric alone will not be enough to counter China. This includes shoring up trade relationships, committing US investment to impactful and visible infrastructure and offering viable technological and funding alternatives to Chinese sources.
Evan Williams (egwa2022@mymail.pomona.edu) is a student at Pomona College studying public policy and olitics. He previously served as an intern at The Pacific Forum and S-3 Group in Washington D.C. His upcoming thesis will further explore the strategic and economic role played by China in South America.
