The United States has committed $4.5 million for design work on a project to modernize Peru's Callao naval facilities and make room for commercial port expansion, stepping up its involvement near a Chinese-controlled megaport reshaping Pacific trade.
The State Department disclosed the funding Thursday following a Nov. 1-7 visit to Peru and Colombia by Thomas DiNanno, undersecretary for arms control and international security. The money comes from previously allocated Foreign Military Financing funds.
Callao, Peru's busiest commercial port, lies less than 50 miles from Chancay, the $1.3 billion deepwater terminal majority-owned by China's state-owned Cosco Shipping Ports. The neighboring facilities have become a focus of competition over trade routes and strategic infrastructure along South America's Pacific coast.
The new funding supports the design phase of a plan to relocate Peru's principal naval base, separating military operations from civilian shipping and freeing space for Callao's commercial growth.
It follows Washington's January approval of a potential sale of engineering, construction and logistical services valued at up to $1.5 billion. That figure is the estimated ceiling for a purchase requested by Peru, rather than U.S. investment or aid committed to the project.
According to the Defense Security Cooperation Agency, the proposed package includes engineering studies, maritime facilities, construction management and technical assistance. Up to 20 U.S. government or contractor representatives could work in Peru for as long as a decade. The final price would depend on negotiations and Peruvian requirements.
Chancay was inaugurated in November 2024 and began commercial operations in June 2025. Part of China's Belt and Road Initiative, it offers direct shipping links to Asia, including Shanghai, cutting the Peru-China journey to approximately 23 days.
Callao nevertheless retains a substantial lead in cargo volumes. Peruvian business newspaper Gestión cited figures showing it handled about 1.9 million containers between January and July, compared with approximately 246,000 at Chancay. The newer terminal's volume rose 74% from the corresponding period a year earlier.
The rivalry has also exposed disagreements over regulatory authority. In February, Washington warned that Peru risked losing effective oversight of Chancay after a court ruling restricted transport regulator Ositran's supervision of certain operations.
China rejected the criticism, while Cosco said the ruling did not eliminate oversight by Peruvian customs, police or environmental authorities. Ositran said it would appeal, arguing that the decision created an exception to rules governing other major ports.
American officials have raised concerns about possible military uses of Chinese-operated commercial ports. Peru maintains that Chancay is a commercial facility, and no evidence has established that it operates as a Chinese military base.
Lima's relationship with Beijing complicates Washington's efforts to deepen its influence. China is Peru's largest trading partner and a major purchaser of copper, with Chinese companies holding significant investments in mining, electricity and transportation.
President Keiko Fujimori has pursued closer U.S. security cooperation while maintaining those economic ties. Alongside the Callao funding, DiNanno announced $20 million for F-16 aerial refueling capabilities and $1 million in technical assistance for potential small nuclear reactor projects.
