Peru: A New Target in US–China Competition for Global Influence

May 1, 2025

Adrian Aranda Alzamora

Peru: A New Target in US–China Competition for Global Influence

 

Introduction

Since the early 19th century, the United States has sustained a controlling influence over Latin America under policies like the Monroe Doctrine, which sought to avert foreign colonial interference, besides the US, that is. Many of the countries that make up Latin America today gained independence from European colonial powers around the first quarter of the 19th century. Since then, the US has intervened in these nations’ politics and economies to ensure its strategic interests remain unopposed. This has been achieved in more direct ways, such as invasions, coup d’etats, and the installation of puppet regimes, and in more covert ways, through funding counter-revolutionary groups and economic domination. An example of direct intervention include the invasion and occupation by US Marines in Grenada to overthrow Maurice Bishop, a leftist revolutionary leader. Indirect interventions can be seen in the failed CIA-backed Bay of Pigs invasion in Cuba in 1961 and the economic blockade that has cost Cuba nearly $1.5 trillion in the past 62 years., Peru is no exception to attempts by the US to expand its sphere of influence over the region.

US–Peru Relations, Cold War to the 2000s

From the 1960s to the 1980s, US–Peru relations were unsteady. During this time, waves of leftist ideals and nationalism appeared in many sectors of Peruvian society and the economy, rattling US multinational corporations, many which faced nationalization. Additionally, Peru continued with its commitment to the non-aligned movement, engaging with both the US and the USSR for trade and investment and pursuing an independent foreign policy. With the goal of preventing the spread of Communism, especially in its “backyard”, Peru’s non-aligned policies created tensions with the US. Coming out of the “lost decade” of the 1980s in a macroeconomic crisis, battling a Marxist insurgency known as the Sendero Luminoso, and the growing drug trade, Peru was desperate for an ally. With the fall of the USSR in 1991, US–Peru relations took a turn for the better. The USSR was gone and China was still reforming and developing, so there was no other country but the US for Peru to turn to for assistance.

Chinese Investment in South America and Peru

As the US re-oriented its foreign policy towards the Middle East after the 2000s due to the War on Terror, this left open a place for other countries to move into Latin America, namely China. In the mid-1990s, post-reform China heavily invested in Latin America at the turn of the century. From 2000 to 2020, trade between China and Latin American grew from USD 12 billion to USD 315 billion, with China eventually overtaking the US as South America’s largest trading partner by 2015. This pattern of massive investment and trade has been observed in multiple countries of South America, but the extent of Chinese investment in the region can best be witnessed and understood in Peru.

 

Peru–China bilateral trade has grown significantly since 2000. At the time, bilateral trade did not even reach USD 500 million, but would eventually reach nearly USD 5.5 billion by 2010. Boosted by a free trade agreement between Peru and China in 2009, bilateral trade continued to grow to nearly USD 14 billion by 2019. Bouncing back from the COVID-19 pandemic, Peru–China trade has now grown to over USD 23 billion in 2023. In 2019, Peru joined China’s Belt-and-Road Initiative (BRI), further connecting South America to China. The US’ neglect of Latin America has allowed these countries to pursue economic and political relations with other countries, like Russia, China, and the European Union. This enormous investment into Peru has brought the country closer to China and away from the US, whose priorities currently appear to be in Eastern Europe and the Middle East. Burgeoning trade with China further demanded more economic and trade links, culminating in the Chancay megaport.

During the 1990s, the US supported Peruvian president Alberto Fujimori in his attempt to defeat Sendero Luminoso. It was at this time that the CIA funneled millions of dollars to the Fujimori government to aid its fight against the Communist insurgencies and to fight cocaine trafficking. Fujimori’s subscription to the neoliberal model of development further mended the once-frosty relationship of the 1970s and 1980s. With US financial and military assistance, Peru was able to largely defeat Sendero Luminoso by 2000, with remnants of the group fleeing to rural areas in the interior. This close cooperation with the US strengthened the relationship between these two countries. However, this flourishing relationship would stop during the 2010s, seeing both the rise of China as an alternative business partner and with the Pink Tide, which saw leftist leaders elected in multiple Latin American countries. 

“From Shanghai to Chancay,” Peru as China’s Gateway to South America

The Chancay megaport is a USD 3.5 billion port constructed by a Chinese construction firm. This port, now the biggest in the Pacific coast of South America, will reduce shipping times between South America and China from 45 days to 23. It is expected that multiple countries will use this port to ship their raw materials to China and other East Asian markets, transforming Peru into a logistics hub in South America. Many in China and Peru have lauded the construction of the Chancay megaport, but many in Washington have raised security concerns. The Chancay megaport is expected to create thousands of jobs and revitalize the still recuperating post-COVID-19 economy of Peru. However, US security concerns stem from the fact that Cosco Shipping, the Chinese firm that built the port, acquired a 60% stake in the port, as well as exclusive control of the Chancay megaport for 30 years. It is argued by Laura Richardson, chief of the US Southern Command, that China could eventually use the port for naval purposes. Such a presence would constitute an affront to US interests in the region by an adversarial foreign power not seen since the Cuban Missile Crisis. 

Despite Washington’s concerns, Peruvian officials have continued voicing their support for the project, ready to welcome a new era of development. The excitement has been echoed by their Chinese counterparts, affirming the creation of 8,000 jobs and USD 4.5 billion in annual revenues. As claimed by the Peruvian Minister of Transport and Communications, the goal is for Peru to become the “Singapore of Latin America.” Such efforts would transform Peru into a hub for South American raw materials and East Asian manufactured goods. Enticed by reductions in transportation costs, other South American countries, like Brazil, Colombia, and Chile are looking to export their products to Asia via Chancay, requiring better regional integration and further investments in infrastructure.

One project looking to tackle this issue is a bi-oceanic train between Brazil and Peru. Exporting Brazilian goods and products via truck to the port of Chancay has already reduced shipping time from Brazil to Asia by two weeks. A train connecting the Brazilian interior to Chancay would further support Peru’s growing regional importance, as well as fostering economic integration with other South American countries. These are all positive outcomes for Peru, brought forth by China’s investment in the country, which are incomparable to others in the region. The strengthening relationship between Peru in China is now one that the US is unhappy with, and it is one that the incoming US President Donald Trump seeks to limit.

US Response to the Chancay Megaport

Xi Jinping’s involvement in Peru is not one that has been matched by his US counterpart. During his tenure, Latin America has only further distanced itself from the US, and South America especially does not seem keen to sever relations with China for a country unwilling, or unable, to pay attention to and invest in this region. Nowhere else could be evidenced at the 2024 APEC Summit, which was held in Lima. During the summit, Peru inaugurated the Chancay megaport, with China being the focus of the summit. While Xi Jinping got the red carpet treatment, Biden was relegated to the back of the APEC leaders photo, clearly illustrating that the US had been replaced by China as a top ally. The US did attempt to court Peru with some investment in infrastructure projects, like the construction of a spaceport in Piura, but such investments were unable to match the volume of investment offered by China. Having lost the possibility of re-election, Biden will not be able to mend the deteriorating relationship between the US and Peru in a second term. The US is now attempting to counter China’s influence in Peru by expanding its presence in surrounding countries.

Although the US has lost influence in Peru and other Latin American countries, it appears it is actively trying to undo this trend and expand its military presence and dominance in the region. In 2023, former President Biden and the then-president of Ecuador Guillermo Lasso signed a military cooperation agreement. The military aid was to help Ecuador deal with its security crisis caused by a rise in drug cartel violence. In 2024, the new president of Ecuador, Daniel Noboa, further approved more military cooperation agreements with the US which allowed for US military personnel to operate in Ecuador and arranged joint naval exercises. US military presence in Ecuador will continue to grow, as the US will now construct a military base in the Galapagos Islands. This development has been criticized by many Ecuadorians as a violation of their country’s sovereignty, as US personnel had previously been removed from the country in 2014 and the Ecuadorian constitution was changed to ban foreign military bases. Given that Ecuador and the Galapagos Islands are in close proximity to Peru, the US could use its presence to advance its security interests in the region. In the event of conflict with China, the US could use its base in Ecuador to restrict or even terminate China’s access to South American raw materials through the Chancay megaport and the Panama Canal. With the US having re-established its foothold in Ecuador, the second Trump administration is likely to continue the efforts to regain influence in the region and remove China from its backyard.

It was initially hypothesized by some that President Trump, with an “America First” focus, might not take too much action to deter Chinese investment in Latin America. However, many now expect that Trump, whose focus is primary on China and illegal migration, might seek to re-engage and reconnect with Latin America, as well as counter Chinese influence in the region. Trump officials have put forward policies to counter Chinese investment in the region, often in the form of tariffs. It was clarified by a port official that Trump’s proposed 60% tariff on Chinese goods would apply to the goods of any country processed by the Chinese-funded Chancay port. This is a direct attempt to dissuade South American countries from using the port and to reduce the benefits that Peru is to receive through its cooperation with Beijing. It appears now that a second Trump administration, having claimed that it would not involve itself with conflicts abroad, is turning its eyes to its former backyard. 

Conclusion

Despite US efforts, economic links between Peru and China, as well as relations between China and other South American countries, continue to grow. China will have been heavily investing in South America for nearly 30 years by the conclusion of the second Trump administration. With only four years left, it is unknown if Trump will be able to undo three decades worth of neglect. The next Peruvian presidential election will occur in 2026, and prior to his death, it was announced that Alberto Fujimori, former dictator of Peru and staunch US ally, would once again run for president. Despite it being illegal for him to do so, the announcement was welcomed by many in Peru, and it was expected that his daughter and fellow right-wing politician, Keiko Fujimori, would be his running mate, despite already having three unsuccessful presidential campaigns. After the passing of Fujimori, the father, his daughter claimed that she would not be running in 2026, but it would not be unexpected for her to retract that statement as the election approaches. A successful Fujimori presidency, not seen in Peru in decades, might be accompanied by a rekindling of US–Peru relations.

 

In the coming years, and with a renowned US focus into the region, Peru must now decide how it will proceed in the following years. Continued trade with China is expected to bring economic benefits to the country, which will only help it to grow and further industrialize. However, the country should also consider the possibility of US retaliations against it. For the past 60 years, Latin America has seen what punitive economic measures have done to the Cuban economy, and although any Trump tariffs are unlikely to bring forth such destruction to its economy, there is no doubt that it will have an significant impact on the region. It may be strategic to continue to welcome Chinese investment, while at the same time maintaining cooperation with Washington, and even to use US security concerns to entice more investment from the country.

 

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