Throughout the world, chili and chili powders are spices of considerable economic importance. Rocoto (Capsicum pubescens R. & P.) is a chili pepper used in Andean cuisine. Fresh chili is perishable and therefore it is convenient to protect the capsaicin, color and other bioactive compounds through preservation methods such as encapsulation. The present study systematically evaluates the technical and environmental aspects of producing encapsulated Rocoto red chili powder using three different wall materials—maltodextrin, rice protein and rice flour—in conjunction with two drying methods, namely convection drying and vacuum drying. Our technical objectives focused on developing an encapsulated product with high heat and vibrant red color, key attributes that significantly influence consumer purchasing behavior. In addition, the study aimed to mitigate the loss of polyphenols, flavonoids and antioxidant activity. After identifying the optimal conditions for each wall material and drying process, a comprehensive environmental assessment was conducted to identify the most efficient and sustainable production methods. The results demonstrate that rice flour encapsulation (20%) in conjunction with hot air drying (40 °C) represents the most efficacious method for the preservation of chili powder’s pungency. This approach resulted in a mere 24% reduction in Scoville units while maintaining the powder’s vibrant red coloration. This method not only preserved key bioactive compounds, including capsaicin, polyphenols and flavonoids, but also significantly enhanced the antioxidant capacity of the product. From an environmental perspective, this approach offers significant sustainability benefits, reducing the overall environmental impact by approximately 72% compared to vacuum drying of unencapsulated chili. The use of rice flour as an encapsulant aligns with sustainability goals, making it the most efficient option for balancing product quality and environmental performance.