John Price
Managing Director
AMI
As the global economic and political landscape becomes increasingly multipolar, Latin America has emerged as a key battleground between two major powers: China and the United States. Once considered the United States’ backyard, the region is now a strategic pivot point where China’s economic diplomacy and financial influence have become deeply entrenched. The intensifying contest reflects broader geopolitical trends that mirror a shift in global power, where influence is asserted not just through diplomacy and military strength, but through trade, investment, infrastructure, and technological reach.
China’s Long-Term Strategy in Latin America
China’s engagement with Latin America has evolved through four major phases over the past 25 years: acquiring natural resources, securing construction projects to support domestic employment, expanding markets for Chinese brands, and exporting digital services. These strategic goals are tailored to reflect China’s internal priorities—industrial growth, geopolitical influence, and economic self-reliance.
The most recent phase has been heavily technology-centric, with Chinese private firms playing a dominant role. Notably, Chinese foreign direct investment (FDI) has targeted critical minerals essential for the global energy transition, such as lithium, cobalt, and rare earths. In countries like Argentina, Chile, Bolivia, and Brazil, Chinese companies like Ganfeng Lithium, Tianqi Lithium, and Zijin Mining have acquired strategic assets worth billions.
Additionally, China has made calculated investments in maritime infrastructure. With stakes in nearly 40 ports across Latin America and the Caribbean—including full control of Peru’s Chancay port—China has positioned itself as a dominant player in logistics and maritime trade. These investments have raised alarms in Washington, where policymakers worry about potential implications for U.S. naval operations and broader strategic mobility.
Economic Leverage Through Trade and Lending
China’s approach in Latin America extends beyond mining and ports. Through bilateral lending, often exceeding the portfolios of multilateral development banks, China has entrenched itself as a key financier. These loans, often tied to infrastructure projects and collateralized by commodities like oil, grant China considerable political leverage over recipient countries.
Trade is another area where China has gained an upper hand. Its commodity needs—especially agricultural products and minerals—are highly complementary with Latin America’s export profile. As a result, China has become the number one trading partner of several South American countries. This interdependence has made it difficult for Latin American governments to distance themselves from Beijing, even under pressure from Washington.
America’s Strategic Reawakening
For much of the early 21st century, U.S. foreign policy neglected Latin America, allowing China to gain ground largely uncontested. However, this changed under the Trump administration, which adopted an explicitly anti-China strategy in the Western Hemisphere. This shift has continued into 2025, with U.S. policymakers viewing Chinese influence not only as a commercial threat but also a strategic risk.
American concerns are diverse and region-specific. In Panama and the Caribbean, Chinese involvement in canal logistics and port infrastructure is perceived as a military risk. In South America, Chinese stakes in critical minerals, digital infrastructure, and energy projects are seen as undercutting U.S. interests. Mexico, meanwhile, is a focal point due to its role in North American supply chains. Washington is particularly wary of Chinese companies using Mexico as a backdoor into the U.S. market, circumventing tariffs and rules of origin under the USMCA.
Washington’s Policy Arsenal: Tariffs and Treaties
To counter China’s influence, the U.S. is leveraging economic tools, including tariffs and trade treaty revisions. The Trump administration has hinted at renegotiating or even withdrawing from the USMCA to pressure Mexico into limiting Chinese investments. Tariffs are also being used diplomatically to coax countries like Peru, Brazil, and Bolivia into aligning more closely with U.S. trade policies.
However, these measures are not without risk. While they might succeed in repatriating some manufacturing to the U.S., they could also hurt industries that depend on regional integration, such as automotive, electronics, and aerospace. Moreover, countries caught in the middle—such as Argentina or Colombia—may resist being forced to choose sides, preferring to maintain pragmatic relationships with both powers.
Latin America’s Strategic Calculus
For Latin American countries, the rivalry between China and the U.S. is both an opportunity and a dilemma. China’s model offers infrastructure financing, market access, and diplomatic support—often with fewer political conditions. The U.S., while offering historical ties and security cooperation, is often seen as inconsistent in its regional commitment and overly focused on domestic concerns like immigration and drug trafficking.
Latin American leaders are increasingly adopting a non-aligned stance, seeking to maximize benefits from both powers. However, as U.S. policies become more aggressive, especially in areas like tariff enforcement and trade conditionality, this balancing act becomes more difficult.
Some nations are already adapting. Brazil, for instance, stands to benefit from the U.S.-China trade war as China shifts agricultural purchases away from the U.S. Argentina, on the verge of a growth rebound, may leverage Chinese investment to stabilize its economy. Meanwhile, Mexico faces a more complex scenario, as political uncertainty and dependence on the U.S. market make it highly vulnerable to shifts in American policy.
Digital Disruption and Demographic Shifts
Beyond geopolitics, Latin America is undergoing profound structural changes. E-commerce penetration of total retail is rapidly growing and expected to surpass that of the U.S. by 2027. Local tech ecosystems are emerging, though venture capital remains limited. Data demand is booming, driven by mobile usage, IoT, and AI applications. These dynamics offer new avenues for both Chinese and American firms to assert influence—through cloud services, fintech, digital payments, and infrastructure.
Demographically, the region is aging, leading to shifts in consumer spending—from education and basic goods to healthcare, financial planning, and wellness. These transitions create opportunities for foreign investors but also challenge governments to adapt fiscal and social policies.
Latin America needs more investment than ever. In response, the region’s political center is leaning rightward again, eschewing the leftward populism it embraced after COVID, inspired by the macro-economic success of Javier Milei’s dramatic policy changes in Argentina. Successful governments will adopt policies that provoke the repatriation of Latin American savings stored abroad as well as embrace more foreign direct investment from all partners who bring capital, technology, and know-how. This is not the time to choose one economic partner over another.
The Energy and Resources Equation
The energy transition further complicates the geopolitical equation. While countries in the region are rich in renewables and critical minerals, they also depend on fossil fuel revenues. This duality means that investments in solar, wind, and battery storage can coexist with continued oil exports. Here too, China has been a major player, with strategic bets on lithium, solar equipment, and green hydrogen infrastructure.
U.S. companies, meanwhile, have struggled to penetrate these markets, in part because lower risk, larger opportunities can be found in the US market. Chinese companies, by contrast, are incentivized to expand abroad. Nevertheless, Washington is beginning to promote investments in green tech and minerals processing as a way to counterbalance China’s dominance through changes in tax policies.
A Region in Flux
Latin America finds itself at the center of a global power struggle. The region’s wealth in natural resources, growing digital economy, and strategic location make it a coveted partner for both the U.S. and China. Yet, the emerging reality is that most Latin American nations prefer not to choose—they seek economic partnerships that deliver growth, infrastructure, and technology, regardless of geopolitical allegiances.
For the U.S., regaining influence will require more than threats and tariffs. It will demand consistent engagement, infrastructure investment, and respect for regional sovereignty. For China, the challenge is to sustain its momentum while managing backlash and maintaining trust.
Ultimately, Latin America is not just a battleground—it is an agent of its own future. How the region navigates this great power rivalry will shape not only its economic destiny but also the global balance of power in the 21st century.
