A battle scene circled by boats in South American city (5,6)
I believe the answer is:
punta arenas
'south american city' is the definition.
(city in Chile)
'a battle scene circled by boats' is the wordplay.
'battle scene' becomes 'arena' (arena can mean the location of a battle).
'circled by' means one lot of letters goes inside another (I've seen this in other clues).
'boats' becomes 'punts' (I've seen this in another clue).
'a'+'arena'='aarena'
'aarena' going within 'punts' is 'PUNTA ARENAS'.
'in' acts as a link.
(Other definitions for punta arenas that I've seen before include "Most southerly city of mainland Patagonia" , "Seaport at the foot of Chile" , "City of southernmost Chile" , "City at the southern tip of Chile" .)