U.S. Energy Investment in Latin America to Counter China

The U.S. energy investment in Latin America aims to counter China’s dominance by strengthening supply chains and boosting renewable energy. The Covid-19 pandemic highlighted the need for robust supply chains, as global industries faced severe disruptions. Additionally, the U.S. government and other international powers are emphasizing the importance of a green transition. Moving away from fossil fuels in favor of cleaner alternatives signifies a shift in the global energy market, where China has long been a leader due to its decades-long investment in renewable energy. To ensure energy security, the U.S. is now focusing on regional renewable energy investments and supply chains.

The Role of China in Global Energy

China has become a renewable energy powerhouse thanks to massive government investment in wind and solar power, as well as mining and manufacturing. It dominates several industries associated with the green transition, including lithium mining – needed to produce electric vehicle (EV) batteries and semiconductor manufacturing. China is home to over 80% of the world’s solar PV module manufacturing capacity and battery production. It is the biggest EV battery exporter, contributing 70% of global exports in 2023. Meanwhile, the U.S. and EU account for just 5% of the global battery manufacturing capacity each. 

While other regions, such as North America and Europe, are investing in the rapid expansion of their renewable energy capacity, China is expected to dominate the sector for decades to come. The Asian giant relies heavily on other regions of the world to support its clean energy sector, including minerals mining in South America, meaning that the U.S. and EU must rapidly step up their investment in key energy regions if they want to compete with China and ensure the future of their energy security.  

Latin America’s Role in Global Energy

Latin America and the Caribbean is a resource-rich region that is expected to contribute heavily to the global green transition. There are biofuels in Brazil, hydropower in Brazil, Venezuela, Mexico, Colombia, Argentina and Paraguay, high-quality solar and wind resources in Brazil, Mexico, Chile and Argentina, extensive copper and lithium reserves in Chile, Peru and Argentina, and vast oil and natural gas resources in Venezuela, Brazil, Colombia, Argentina, Mexico and Guyana. 

Foreign Investment in Latin America’s Energy Market

The U.S. has long been involved in Latin America’s energy industry, with decades of oil and gas exploration and production projects across the region. Oil and gas majors such as Exxon and Chevron continue to hold major stakes in Venezuela and Guyana, with plans to pump “low-carbon oil” for years to come. In addition, the Biden administration has identified the region as key to the Americas’ green transition. In 2023, four of the top ten announced projects by value in Latin America related to green hydrogen or green ammonia. The region announced 19 megaprojects with a value of over $1 billion each, with 17 supported by foreign investors, such as the U.S., Spain, the Netherlands and Luxembourg. 

There is significantly more potential for the U.S. to expand its role in the region to counter China’s position in the Latin American energy market. As the Biden administration looks to develop U.S. manufacturing capacity, particularly in terms of EVs and batteries, it could invest in mineral mining in South America, where many of the metals needed to fuel manufacturing are located. 

Chile, Argentina and Bolivia, known as the lithium triangle, are home to the world’s biggest lithium reserves – around 58% of the global total. This has attracted heavy investment from China, which has several mining projects in the region, helping it to produce around two-thirds of the world’s lithium supply. There is huge potential for the U.S. to develop mineral mining operations in the lithium triangle to provide a regional supply of critical minerals. Further, investment in emerging extraction technologies could help the U.S. establish sustainable mining practices, in contrast to the majority being used in the region at present, further supporting U.S. climate aims. 

However, it will have to move fast, as China has already increased its investment in the region with plans to further expand its activities. Trade between Latin America and China increased from $12 billion in 2000 to over $445 billion in 2021, demonstrating the deepening of ties between the powers. Between 2005 and 2023, foreign direct investment from Chinese firms to South America and Mexico totalled $212 billion. While this funding went to a wide array of industries, recent investments have been more focused towards solar, wind, hydropower, EVs and mining in strategic materials such as lithium and rare earth minerals. 

The U.S. has long-established ties with Latin America and the Caribbean, with strong trade links and major investments across a range of industries. As the U.S. transitions to green, greater investment in the region could help solidify regional energy security by developing the U.S. supply of critical resources needed to develop its manufacturing industry. However, the U.S. must act fast if it hopes to counter the role of China in the region, as the Asian giant continues to deepen its ties with Latin America through major investments in green energy and clean technologies.