The United States has committed US$4.5 million to the design of an infrastructure programme at Peru’s Port of Callao, as Washington seeks to strengthen its engagement with a country balancing American security ties against growing trade relations with China.
The funding, disclosed by the US State Department on Thursday, comes as Peru prepares to relocate its main naval facilities to free waterfront space for commercial port expansion. Callao, the country’s busiest port, is competing with the Chinese-controlled Chancay deepwater terminal, located less than 80km up the coast.
The US$4.5 million grant was drawn from the Foreign Military Financing programme, which funds partner countries’ purchases of American defence goods and services. It will cover the design phase of what the State Department described as the “Port of Callao infrastructure programme”.
The funding was disclosed in a note on a recent visit to Peru and Colombia by Thomas DiNanno, the State Department’s undersecretary for arms control and international security. DiNanno toured Callao to examine American support for modernisation and port security projects, although the department did not specify whether these were directly connected to the navy’s relocation.
He also announced US$20 million in funding from the 2026 financial year to develop Peru’s F-16 aerial refuelling capability, intended to extend the range and effectiveness of its fighter fleet.
Washington’s involvement in the naval base project was established earlier. In January, the State Department approved Peru’s proposed use of up to US$1.5 billion of its own funds for American design, construction and engineering services at the facility. The Defence Security Cooperation Agency said the project would improve naval safety by reducing civilian-military interactions at the existing base, which shares waters with commercial port operations. Up to 20 US government or contractor personnel could remain in Peru for as long as a decade to oversee construction.
The relocation, however, predates the controversy surrounding Chancay. The Peruvian navy has been based at Callao since 1936 and has long complained about congestion caused by sharing the area with commercial terminals operated by APM Terminals and DP World. Its 2017 master plan proposed moving naval facilities several kilometres north to release waterfront land for commercial use. Construction of the first phase began in 2023, while the government authorised a 4.29 billion sol (US$1.2 billion) bond issue in April for the second phase, reportedly including submarine berths and a new headquarters for the navy’s Pacific operations command.
Chancay has nevertheless become a source of strategic concern for Washington since Chinese President Xi Jinping inaugurated the US$1.3 billion port in November 2024. China’s state-owned Cosco Shipping Ports owns 60 per cent of the deepwater facility, with Peruvian mining company Volcan holding the remainder. US officials have warned that the port could eventually accommodate Chinese warships.
A dispute over regulatory authority at Chancay intensified in January when a Lima judge ruled that the transport regulator Ositran had no jurisdiction over the privately owned terminal. The US State Department warned that Peru risked losing sovereignty over the facility. An appeal court restored Ositran’s powers in July, prompting Cosco to challenge the decision before the Constitutional Tribunal. Washington subsequently revoked the judge’s visa in September under a policy targeting corruption.
Despite the dispute, Chinese commercial activity at Chancay has expanded. Its share of Peru’s container traffic rose to 10.1 per cent between January and July, compared with 5.6 per cent last year, according to the Lima Chamber of Commerce. The increase followed Cosco Shipping Lines’ transfer of a regular Asia service from Callao to Chancay in December 2024. Callao remained substantially larger, handling 3.3 million twenty-foot equivalent units during the whole of last year.
Peru has sought to maintain relations with both powers. President Keiko Fujimori, who took office in July, has promised closer ties with Washington, while China remains the country’s largest trading partner. Foreign Minister Carlos Espa has said Peru will not choose between the two countries and has called for a prohibition on military use of its ports.
