Beijing is gradually connecting South America through its massive investments in infrastructure - right under Washington's nose.

In November 2024, China unveiled the construction of the Chancay Port in Peru, with an initial investment of $1.3 billion. The Chancay Port, operated and majority-owned by the Chinese state-run shipping company COSCO, is currently the largest and most influential deep-water port on the Pacific coast of South America. It has provided the People's Republic of China (PRC) with a key gateway to access South American mineral and agricultural resources.

The Chinese port in Peru may be the most significant strategic victory that China has achieved on the continent so far, but it is not its first one.

Over the past two decades, while the United States was trying to promote democracy abroad, China quietly built an infrastructure "empire" in Latin America and the Caribbean.

The preferred weapon in this offensive is state-backed financial investment programs. Chinese banks are now major sources of investment for Latin American countries, especially those important for energy or trade. Moreover, these investments are bearing fruit. In May 2025, Colombia became the latest Latin American country to join the Belt and Road Initiative.

This is a crucial victory for Beijing, as Bogotá had been a key ally of the United States. However, in recent years, under the leadership of its first left-wing president, Gustavo Petro, Colombia's stance has shifted towards China and regional rivals. Now that Colombia has joined the Belt and Road Initiative, it has become the latest member of the South American countries that have joined. Through large-scale loans and infrastructure projects, Beijing has gained significant political and economic influence in the Western Hemisphere.

However, not everything is going China's way. Recently, Panama has sued the Chinese operators of two ports located at both ends of its important canal. Because the financial dominance over the Panama Canal is about to expire, China has turned to other trade routes to demonstrate its influence. Its alternative route goes through the new WSA5 route via Chancay Port directly to Shanghai and Qingdao in China, which can reach South America directly. This transcontinental route along the western coast of South America is the first to connect Colombian, Ecuadorian, and Peruvian ports directly to China, and is expected to reduce transportation costs by 20%.

All of this is part of a larger strategy. China's port investments have opened up a network of key mineral extraction points funded by China across Latin America - most importantly, lithium mines in Bolivia. Last year, Chinese companies finalized a $1 billion initial investment agreement to build a lithium mine in the Uyuni Salt Flat in Bolivia, which will produce more than 35,000 tons of lithium annually. These ports and mines can be connected by a planned trans-continental railway from Chancay to Brazil, with stops in Bolivia, which will transport key minerals back to China's manufacturing centers.

All of this is a problem for the United States. It is increasingly clear that in order to effectively counter China's long-standing international development financing program, the United States needs to redevelop its own international development financing program. Without an effective U.S. international development financing strategy, Beijing will continue to monopolize its position as the lender in the Western Hemisphere.

For the Trump administration, the answer lies in mobilizing American capital, and its biggest asset is the Development Finance Corporation (DfC). The DfC was originally established under the 2018 Build Act to make strategic foreign investments, and its main forms of financing are: direct investment funded by Congress and profit policies from previous investments. It can also encourage private capital from American enterprises by providing credit subsidies and risk insurance, otherwise these enterprises might be cautious about investing in critical projects and unstable environments. Essentially, the U.S. Development Finance Corporation can concentrate the influence of both the public and private sectors of the United States on South American infrastructure that relates to national security interests.

Unfortunately, the U.S. Development Finance Corporation is not yet ready to compete with China. Under the previous administration, the U.S. Development Finance Corporation also had similar problems with misallocation of funds and other violations like the U.S. Agency for International Development. Now, the White House needs to reconfigure the U.S. Development Finance Corporation so that it can take on more precise national security missions.

There are many opportunities to do this. The U.S. Development Finance Corporation can include funds previously allocated to the U.S. Agency for International Development in its discretionary funding for the fiscal year 2026, which is $803 million. In turn, expanding the budget of the U.S. Development Finance Corporation will help it attract more American private capital to invest in developing countries. And an increase in congressional appropriations will allow the U.S. Development Finance Corporation to provide more credit subsidies for insurance, enabling it to offer higher-risk loans for critical projects at lower interest rates, thus competing with China's state-supported interest rates and investments. Over time, through appropriate strategic investments, the U.S. Development Finance Corporation (DfC) should be able to fund its own national security missions - because the larger the bank account used for successful overseas investment projects, the greater the profits will be.

However, to achieve this goal, the DfC needs to relax its loan restrictions, allowing it to invest throughout South America without going through lengthy regulatory procedures. Currently, the DfC's services are limited to relatively inefficient poorer developing countries. Since China's Belt and Road Initiative has no such restrictions, they cannot do this. This relative freedom allows Beijing to invest in higher-income but strategically significant countries such as Colombia, Peru, Brazil, and Chile.

If the DfC wants to compete with Chinese capital, the White House needs to create a fair economic competitive environment by optimizing its mission and influence. It also needs to better align the institution with national security priorities and use it as a tool for seeking overseas strategic investments. At the same time, South America seems to be the best starting point.

Sources: The National Interest Author: Robert Joya

Time: September 8

Original: https://www.toutiao.com/article/7548365915589001778/

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