China’s expanding economic and political presence in Latin America and its challenge to US regional influence

China’s expanding economic and political presence in Latin America has entered a new phase of accelerated sophistication and strategic depth, reshaping the geopolitical and financial landscape of the Western Hemisphere with profound implications for U.S. regional influence. Recent technological breakthroughs, intensified infrastructure control, and legal reforms in China—combined with growing concerns over digital authoritarianism and cybersecurity vulnerabilities in Latin America—underscore a multifront contest that is increasingly complex and consequential.

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Deepening Tokenized RMB Adoption Amid Persistent Challenges

China’s push to internationalize the renminbi (RMB) through tokenized digital currency platforms continues to gain traction in Latin America, even as currency volatility and sovereignty concerns limit rapid transformation.

• Panama remains the regional epicenter for tokenized RMB flows, leveraging Chinese-operated ports equipped with advanced customs platforms that integrate digital yuan payments. These innovations have improved trade efficiency but have also triggered increased regulatory scrutiny from Panamanian authorities, who are wary of data privacy, cybersecurity, and sovereignty risks.

• Colombia and Peru have expanded pilot programs embedding RMB digital payments into their trade and banking ecosystems, signaling a gradual but meaningful erosion of U.S. dollar dominance in cross-border transactions. These initiatives benefit from China’s interoperable cross-border payment corridors, which reduce reliance on dollar-based clearing networks.

• Cuba’s continued reliance on tokenized RMB systems to circumvent U.S. sanctions has entrenched Beijing’s financial foothold in the Caribbean, deeply altering traditional payment infrastructures and regional financial alignments.

• The People’s Bank of China (PBOC) remains cautious amid USD/CNY exchange rate fluctuations, which hovered near 6.94 in early 2027, as depreciation pressures restrain broader enthusiasm for RMB adoption. Still, incremental growth in tokenized RMB usage in Latin America points to a slow but steady move toward a more multipolar currency environment.

• Complementing these efforts, Hong Kong has expanded its regulatory frameworks for offshore yuan products and stablecoins, enhancing Latin American access to Beijing-aligned financial infrastructure and facilitating offshore RMB liquidity.

Despite these advances, China’s capital controls and the RMB’s partial convertibility continue to impede the yuan from displacing the U.S. dollar as the hemisphere’s dominant currency. Nonetheless, the expanding footprint of tokenized RMB payments unmistakably signals a reconfiguration of regional financial dynamics.

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Strategic Leverage through Critical Minerals and Infrastructure

China’s growing control over Latin America’s critical mineral resources and infrastructure is central to its ambitions in green energy transitions and technological dominance.

• In Brazil, Contemporary Amperex Technology Co. Ltd. (CATL) has accelerated investments in lithium, cobalt, and nickel mining projects, reinforcing Brazil’s role as a key node in China’s global electric vehicle (EV) supply chain. CATL’s integration of vertically coordinated green technology firms further entangles Brazilian mineral resources with Chinese industrial ambitions.

• The India-Brazil rare earth cooperation agreement, initiated in mid-2026, reflects efforts to diversify supply chains beyond China’s near-monopoly. While joint ventures in mining and processing aim to mitigate Beijing’s dominance, China’s influence remains formidable given its entrenched infrastructure and financing networks.

• Belt and Road Initiative (BRI) projects across Latin America increasingly emphasize climate adaptation and resilience, demonstrating China’s strategic intent to safeguard its investments amid escalating environmental risks.

• Chinese-operated ports in Panama now feature state-of-the-art customs platforms synchronized with tokenized RMB payments, streamlining trade logistics but also stoking sovereignty and cybersecurity debates within Panama and among U.S. observers.

• Technological embedding has intensified, with breakthroughs in optical communications and 6G research, highlighted by the China Unicom–Cisco cloud-network synergy partnership that deepens Latin America’s dependence on Chinese digital infrastructure.

• On the semiconductor front, China’s ongoing $340 billion investment program has been bolstered by the rollout of indigenous N8 transistor technology and the recent development of N9 and N11 generation chips capable of powering AI applications. These advances enhance Beijing’s capacity to influence emerging digital economies and technology supply chains throughout Latin America, despite persistent U.S. export controls.

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Escalating Geopolitical Contest Over Subsea Cables and Cybersecurity

The geopolitics of subsea telecommunications cables in Latin America has become a critical flashpoint, exposing vulnerabilities and intensifying great power rivalry.

• The recent report “Wired for Power: The Geopolitics of Subsea Cables in the South China Sea and Beyond” highlights China’s expanding control over subsea cable networks reaching Latin America, where Chinese-backed projects have proliferated, raising alarms about potential espionage and sabotage.

• Disclosures from the U.S. Cybersecurity and Infrastructure Security Agency (CISA) revealed a critical flaw exploited in subsea cables across the region, confirmed by Taiwan’s TeamT5 cybersecurity researchers. This breach spotlights the fragility of hemispheric digital infrastructure and raises concerns over Beijing’s covert operational capabilities targeting communications networks.

• In Chile, escalating tensions over Chinese-backed subsea cable projects culminated in unprecedented U.S. visa revocations for Chilean officials implicated in facilitating these initiatives, signaling Washington’s resolve to counter Beijing’s control over critical digital infrastructure.

• Investigations have also uncovered China’s export of authoritarian digital surveillance technologies to Latin America, including tools linked to transnational Uyghur family monitoring. These technologies enable enhanced political surveillance, influence operations, and coercive capabilities, representing a troubling extension of Beijing’s digital authoritarianism in the hemisphere.

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Recent Technological and Legal Developments Bolstering China’s Global Ambitions

China’s domestic reforms and breakthroughs in semiconductor and digital technologies provide a stronger foundation for its expanding influence in Latin America.

• The “N6” reforms, a package of new laws and regulatory frameworks on corporate governance, digital finance oversight, and foreign investment management, have strengthened China’s legal infrastructure for outbound economic activities. These reforms improve transparency and risk mitigation, equipping Beijing with better tools to navigate the complexities of overseas investments, especially in infrastructure, technology, and critical minerals sectors.

• Technological advances have accelerated rapidly:

  • Huawei’s recent unveiling of an AI-capable 6G chip has sent shockwaves through the global semiconductor industry, with companies like Nvidia reportedly feeling competitive pressure. This innovation signals China’s intent to leapfrog U.S. technological leadership and embed advanced digital capabilities in its global networks, including Latin America.
  • SMIC (Semiconductor Manufacturing International Corporation) has expanded AI chip production capacity significantly despite facing U.S. export restrictions, indicating Beijing’s success in circumventing technological barriers.
  • China’s semiconductor industry aims to increase advanced chip production capacity fivefold within the next 1–2 years, a move critical to supporting domestic AI development and extending influence over regional tech supply chains.
  • Despite these advances, U.S. sanctions continue to impact global vendors: Synopsys recently forecasted a muted quarter attributed to China export restrictions, reflecting the wider disruption of semiconductor supply chains.

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Diplomatic Flashpoints and Great Power Rivalry Intensify

China’s assertive diplomacy in Latin America continues to provoke sharp U.S. responses amid the ongoing Taiwan-China rivalry and regional alignments.

• Guatemala remains a diplomatic hotspot after President Bernardo Arévalo’s 2026 visit to Taipei, which Beijing condemned vehemently, framing the visit as a direct affront to Chinese sovereignty claims.

• In Venezuela, the suspension of key Chinese oil agreements signals recalibrations in energy diplomacy, injecting uncertainty into regional political alliances and complicating the broader U.S.-China contest.

• Visa revocations linked to subsea cable tensions in Chile underscore Washington’s escalating willingness to take punitive measures to counter Beijing’s digital infrastructure expansion.

• Ahead of the February 2026 Trump-Xi summit, President Xi Jinping underscored Latin American developments to demonstrate diplomatic strength, reaffirming firm stances on Taiwan and emphasizing China’s hemispheric ambitions.

• On the financial front, China has maintained measured re-engagement with U.S. Treasury securities, purchasing approximately $170 billion, balancing geopolitical signaling with pragmatic economic management.

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U.S. and Allied Strategic Countermeasures

In response to China’s multifaceted advances, the United States and its partners are intensifying efforts to safeguard regional sovereignty, economic security, and democratic governance through a comprehensive and partnership-driven approach.

• Diversifying and securing critical mineral supply chains by investing in domestic and regional mining and processing capabilities, alongside deepening strategic alliances with partners like India and Brazil.

• Developing interoperable, transparent digital financial platforms that offer credible alternatives to China’s tokenized RMB systems, prioritizing sovereignty, privacy, and regulatory oversight.

• Providing sustainable infrastructure financing that avoids predatory debt traps and emphasizes resilience amid climate and environmental risks.

• Enhancing intelligence gathering and real-time monitoring of Chinese activities in logistics, digital infrastructure, and supply chains, leveraging emerging tools like the Supply Chain Intelligence Bulletin and advanced digital intelligence research.

• Supporting democratic governance, STEM education, and technology capacity building in Latin America to strengthen political stability and resilience against coercive influence.

• Engaging diplomatically with Latin American partners transparently and respectfully, addressing sovereignty concerns while countering Beijing’s narratives of exploitation and dependency.

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Looking Ahead: Navigating an Intensifying Geopolitical Contest

China’s expanding footprints in Latin America—through tokenized RMB finance, critical mineral and infrastructure dominance, advanced semiconductor and AI technologies, and assertive diplomacy—continue to challenge U.S. regional influence and the established international order.

Key developments to monitor include:

• Sovereignty-driven regulatory pushbacks in Panama and Chile targeting Chinese infrastructure and digital finance projects.

• PBOC currency management and RMB exchange rate dynamics influencing tokenized yuan flows in the region.

• Progress and geopolitical implications of the India-Brazil rare earth cooperation ventures, which may reshape global supply chains.

• Escalating diplomatic tensions linked to Taiwan and cross-Strait competition in Central America.

• U.S. and allied initiatives focused on supply chain diversification, digital finance alternatives, sustainable infrastructure, and cybersecurity capacity building.

• China’s narrative competition to supplant the U.S. dollar through digital RMB expansion and increased engagement in gold markets.

• Evolving China–Venezuela energy relations and their regional geopolitical fallout.

• Rapid advances in Chinese AI and semiconductor technologies, including the impact of export controls on global vendors.

• Heightened cybersecurity vulnerabilities in regional digital infrastructure, especially involving subsea cable exploitation.

The unfolding great power contest in Latin America remains a defining geopolitical challenge of 2026-27, with profound consequences for hemispheric stability, global technological innovation, green energy transitions, and the future architecture of international finance. For the United States and its allies, a careful balance of strategic engagement, intelligence vigilance, and partnership-building will be essential to navigate this complex and evolving landscape.

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In summary, China’s multifront strategy in Latin America—combining financial innovation with infrastructure control, technological embedding, and assertive diplomacy—continues to erode traditional U.S. influence, challenging the hemisphere’s economic sovereignty and political stability. The evolving contest demands nuanced, multidimensional responses centered on partnership, transparency, and resilience to secure the region’s democratic and economic future.