In a Wall Street Journal op-ed in January, Secretary of State Marco Rubio argued that an America First foreign policy is impossible without an Americas-first approach, announcing that the United States would refocus on the Western Hemisphere. He emphasized that securing U.S. borders and reversing migratory flows required working with countries of origin to deter migration and accept the return of their citizens. Those who cooperated would be rewarded; those who did not would face consequences. The secretary signaled a shift in U.S. regional policy: With cuts to U.S. Agency for International Development (USAID) and the Department of State programs in Latin America and the Caribbean (LAC), the United States would no longer rely on development aid to secure cooperation on migration and narcotics control but instead pursue its goals through stronger trade ties aimed at building greater economic security via private sector partnerships.

These changes had their origins in the first Trump administration, when Mauricio Claver-Carone, then deputy assistant to the president and senior director for Western Hemisphere affairs at the National Security Council, authored the Americas Crece (Americas Grow) strategy, which envisioned a whole-of-government approach to support economic development in LAC by catalyzing private sector investment in energy and infrastructure projects in order to foster economic growth. That strategy relied on U.S. capital to support investors and business deals, including in Panama, El Salvador, and Ecuador.

As the United States rethinks how it catalyzes private sector investment around the world, reauthorizing the U.S. International Development Finance Corporation (DFC) is critical to advancing key industries vital to U.S. economic security. The DFC remains the best tool the United States has to deploy market-based solutions to address global challenges—challenges that, if left unresolved, pose risks to U.S. security and create openings for great power rivals to fill the void. As the DFC reauthorization looms, policymakers should rethink how to unlock its full potential as a tool for economic security and to outcompete China.

No Reshoring Without Supply Chain Security

The DFC is one of the most important tools the United States possesses to advance its economic security in strategic regions like LAC. By providing loans, loan guarantees, equity investments, and political risk insurance, the DFC unlocks investment opportunities that would otherwise be too risky or that directly support key sectors of the U.S. economic security strategy. These DFC-backed projects not only respond to the needs of developing countries and reduce dependency on competitors like China but also help build up industries that can play a complementary role as the United States seeks to reindustrialize. At the same time, they create new opportunities for the U.S. private sector in a region with strong growth potential.

The DFC has pursued this by investing in geoeconomically significant projects across the Western Hemisphere—in critical minerals, ports, energy, and telecommunications. Between 2018 and 2024, it invested nearly $11 billion in LAC, including a port expansion in Ecuador and a cobalt-nickel mine in Brazil. Nonetheless, to effectively support an Americas First foreign policy—especially given the closure of USAID—the DFC must scale up its engagement and be strategic in how and where it deploys capital.

To do this effectively, the institution should be granted greater autonomy in selecting projects to finance. For instance, this could include removing the requirement to notify Congress for deals over $10 million and allowing it to retain the profits from investments rather than sending them back to the treasury. With a steadier, self-generated source of income and greater flexibility in deploying capital, the DFC could bypass rigid country income restrictions, support early-stage and high-impact projects, and take on more strategic investments that might otherwise fall outside traditional development parameters.

Partnerships with multilateral actors and other U.S. agencies can complement the DFC’s private sector financing efforts. United States agencies are showing growing interest in investing in LAC. For instance, the U.S. Army Corps of Engineers announced it would participate in the Puerto Quetzal expansion project—Guatemala’s main port on the Pacific Ocean and proposed dredging and infrastructure studies for the Paraná–Paraguay Waterway—the main commercial artery for the Southern Cone. Additionally, multilateral actors, such as the World Bank and the Inter-American Development Bank, which have deep networks with the regional business community, can help to scope more investment opportunities. Renewing and building new partnerships can equip the DFC with additional capital, manpower, and technical expertise, enabling it to pursue a broader range of projects and scale up its investment capacity.

China’s Evolving Economic Statecraft in Latin America

The need to reauthorize the DFC and strengthen investments in geostrategic sectors in LAC is even more critical in the context of increasing competition with China in the region. China’s growing footprint in LAC is a clear indication that Beijing is expanding its influence, not only through traditional policy banks like the China Development Bank and the Export‑Import Bank of China, but increasingly via foreign direct investment by Chinese firms, strategic acquisitions, and targeted projects via new investment channels under the evolving Belt and Road Initiative (BRI).

In recent years, China’s economic relationship with LAC has evolved from the earlier commodity-for-manufactured goods trade to smaller, but more sophisticated cooperation encompassing renewable energy, artificial intelligence, and digital infrastructure, among other things. China refers to these investments as “new infrastructure,” contrasting it with older infrastructure projects that characterized earlier phases of the BRI. Moreover, instead of working through the intermediation of China’s development finance institutions, investors are increasingly doing deals in the region directly. China has subtly rebranded the BRI, shifting its focus from large-scale infrastructure projects to “small-and-beautiful” initiatives that they claim are better aligned with recipient countries’ social welfare needs. While traditional BRI investments in LAC—such as canals, railways, mining, and major transport and energy infrastructure—still account for a significant share of Chinese engagement, a new wave of “frontier” projects has emerged. “New infrastructure” is a concept outlined in China’s 14th Five-Year Plan (2021–2025), aimed at boosting the competitiveness of innovation-related industries such as telecommunications, fintech, and the energy transition.

Chinese state agencies, such as the National Development and Reform Commission, have stressed the importance of investing in traditional infrastructure and new infrastructure concurrently in LAC. In 2022, 58 percent of Chinese investments in LAC were digital investments, while electric vehicle-related investments comprised 35 percent of total Chinese foreign direct investment. Chinese industry leaders have gained a stronghold in the region. For example, Chinese tech giant Huawei provides 70 percent of the infrastructure for Mexico’s 4G-LTE cellular networks. The turn towards innovation also trickled down to traditional sectors. For instance, instead of extracting construction minerals like iron and steel, China now focuses on acquiring companies to produce metals used in green technologies, particularly lithium.

The focus on “new infrastructure” appears to be particularly well-received in LAC. These investments could help countries to build their long-needed digital infrastructure, as well as catalyze their pathways to decarbonization. In a poll conducted by Bloomberg and Latam Pulse earlier this year, more respondents indicated that they preferred to do business with China than the United States, contrasting with public opinion polls conducted just a few years ago where the reverse was true.

Commercially, the expanding presence of Chinese firms could lead to market monopolization—as seen with China Southern Power Grid’s near-monopoly over electricity distribution in Peru—and squeeze out opportunities for local and U.S. investors. China’s involvement in digital infrastructure also poses security risks; it could, for instance, enable intelligence collection and offer the potential for digital authoritarianism through surveillance systems. Additionally, pipelines and power distribution networks embedded in green energy projects may be designed to rely on BeiDou satellite timing signals for their operation, creating potential vulnerabilities that China could exploit as a coercive tool against countries dependent on such infrastructure. Meanwhile, the threats from traditional BRI projects persist as China shows continued interest in these areas. Mining operations jeopardize U.S. access to rare earths and other strategic minerals vital to the defense and semiconductor industries, while large-scale port developments threaten to block U.S. access to key maritime chokepoints and supply routes.

To date, the United States has responded to China’s growing economic influence in Latin America with a hardline approach, pressuring countries to reduce economic engagement with China. The Trump administration raised concerns that close economic partners like Mexico could become a “backdoor” for Chinese goods to enter the U.S. market, which might become a roadblock to building a broader strategic relationship. However, the United States needs an economic offer to complement its other tools. Relying solely on sticks without complementary carrots risks tarnishing the United States’ image, pushing LAC countries further away, and losing market opportunities.

Building an Outcompete Mindset

To fully unlock the DFC’s potential as a tool for the United States to simultaneously bolster economic security and outcompete China, there are five sectors that the DFC should prioritize in LAC: critical minerals, ports, pharmaceuticals, new and emerging technologies, and commercial space.

Critical Minerals: While the United States has vast mineral wealth, it simply lacks the reserves of many critical minerals to meet demand. In contrast, from lithium and copper to rare earths and niobium, LAC is home to abundant supplies of these elements. The United States currently relies on imports for more than 20 percent of 28 industrial minerals, with import dependence exceeding 50 percent for 23 of them—including minerals vital to key industries such as semiconductors, aerospace, automotive manufacturing, and renewable energy. Despite this, China has managed to insert itself into the midstream as a processing and refining superpower, signing long-term offtake agreements with mines in LAC and enticing countries like Chile and Peru to send the majority of their ore to China for processing.

As the DFC takes on a greater role in U.S. domestic minerals production, so too should it look to expand its portfolio in LAC. In addition to direct investment, one area of future focus for the DFC should be establishing offtake agreements with private sector companies in the United States and guaranteeing a buyer for mineral imports from LAC countries to incentivize greater domestic mineral processing and reorient mineral supply from LAC countries to the United States.

Ports: Vital nodes for trade and economic development, ports also present major vulnerabilities for both the United States and regional partners. China has made a concerted effort to embed itself within the regional port ecosystem, enabling it to rewire trade in its favor, collect sensitive intelligence, and, in a worst-case scenario, sabotage critical infrastructure in times of crisis or conflict, posing the risk of disrupting U.S. supply chain connectivity and trade flows. However, despite strong resistance from Beijing, the recent deal between Hong Kong–based CK Hutchison Holdings Limited and U.S. asset manager BlackRock demonstrates that there is potential for U.S. private sector players to gradually start carving out some Chinese influence in strategic ports and securing trade routes for the United States.

The DFC should seek to identify other port projects where targeted investments, in partnership with private sector investors, could extirpate China’s influence and prevent any potential disruptions to U.S. supply chains. Strategic ports along the Strait of Magellan in southern Argentina and Chile, which represent an alternative route from Atlantic to Pacific, are promising opportunities. As China increasingly covets more ports along this critical waterway, being able to take a lead in investing and box out China would represent a major forward-looking achievement in strengthening supply chain resilience in LAC (in addition to the geopolitics). Closer cooperation with the Inter-American Development Bank could present another opportunity for the DFC to identify new bankable projects and get in on the ground floor.

Pharmaceuticals: To replace distant and vulnerable supply chains, domestic production of pharmaceuticals will need to ramp up significantly, but will still need to rely on complementary and more proximate inputs like active pharmaceutical ingredients and chemicals. Even with expanded capacity, the United States is unlikely to meet national demand at competitive prices. This is where key partners like Mexico, Guatemala, the Dominican Republic, and Colombia can play a significant role complementing U.S. production, stabilizing supply chains, and helping keep costs affordable.

New and Emerging Technologies: China’s growing infiltration of Latin America’s digital infrastructure threatens U.S. companies’ operations in the region by enabling surveillance, data extraction, and potential disruptions to telecommunications systems. To this end, the DFC reauthorization could represent an opportunity to create a more flexible model of digital technologies and resist these threats. Previously, the United States and Panama have implemented an $8 million initiative to help replace Huawei-supplied telecommunications towers in 13 locations throughout the country. The DFC can build on similar initiatives and fund more U.S. technology companies to help countries “rip and replace” existing PRC digital infrastructure.

Commercial Space: One sector where the United States enjoys a considerable technical lead over China is space, with a host of U.S. companies remaining at the forefront of space research and exploration. It is also an area where LAC countries have made impressive strides across a host of technologies, from rocket launch technology to satellites. From established players like Embraer to young startups, LAC has also shown significant potential in the space domain. However, this developing market creates both opportunities for collaboration and vulnerabilities that the PRC can exploit to facilitate technology transfer to its own domestic space sector. The DFC can play a role in both helping develop LAC’s space industry and promoting greater industrial security by investing in LAC firms with stipulations that they take measures to limit technology transfer to the PRC.

Reauthorizing and strengthening the DFC is not just about development or competition with China—it is about making smart, long-term investments that deepen economic ties, build resilient supply chains, and reinforce the United States’ position in a region that has always been critical to its prosperity. It is also worth remembering that the DFC’s development-focused projects, whether supporting entrepreneurs, small businesses, or renewable energy, help drive growth and stability in LAC. And that, too, matters for U.S. national security.

Ryan C. Berg is director of the Americas Program and head of the Future of Venezuela Initiative at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Christopher Hernandez-Roy is the deputy director and senior fellow of the Americas Program at CSIS. Juliana Rubio is associate director of the Americas Program at CSIS. Henry Ziemer is an associate fellow with the Americas Program at CSIS. Jessie Hu is an intern with the Americas Program at CSIS.