Trump's Re-election May Spark Conflict with China Over Latin American Energy

By Haley Zaremba - Jan 09, 2025

China has established a strong foothold in Latin America's energy sector, controlling critical mineral supply chains and investing heavily in renewable energy projects.

The US is concerned about China's growing influence in the region and its potential to control key resources.

A Trump re-election could escalate tensions with China and lead to a more confrontational approach to its activities in Latin America.





China’s rapidly expanding presence in emerging markets around the globe, and particularly in Latin America, is creating a geopolitical minefield for would-be competitors around the world. Western powers have been growing increasingly wary of China’s control of key supply chains around the world, including a near-chokehold on critical primary materials and rare earth minerals necessary for tech manufacturing and clean energy development.

South America is rich in key materials in renewable energy and electric vehicle manufacturing such as lithium, nickel, and cobalt. China is already the “dominant producer of rare earths and graphite globally,” The South China Morning Post reports based on recent BloombergNEF data. “It also owns around a third of global rare earths, a sixth of graphite and an eighth of lithium reserves.” And expanding its already significant acquisitions of Latin American minerals is a key part of China’s geopolitical strategy. Chinese companies already own major stakes in one of the largest lithium producers in Chile, have purchased a ‘major evaporative lithium project’ in Argentina, and have signed dozens of trade-strengthening agreements with Brazil.

Chinese investing has been particularly pronounced in the energy sector, and especially the clean energy sector. Around 90% of all installed wind and solar technologies in Latin America are produced by Chinese companies. As of 2023, Beijing had active free trade agreements with Chile, Costa Rica, Ecuador, and Peru (and was in active negotiations with Uruguay). To date, 22 Latin American countries have signed on to China’s massive international infrastructure investing scheme, the Belt and Road Initiative (BRI).

On top of the significant BRI inroads, China’s State Grid now controls most of Chile’s regulated energy distribution, and has increasing levels of control in Peru. In February of this year, the government of Peru approved a deal for state-owned China Southern Power Grid International (HK) to purchase Enel Distribución Perú and Enel X Perú, thereby handing over complete and total control of electricity distribution in the capital city of Lima to Beijing. “China wants to be Latin America’s switch, and Peru has become the paradigm of that effort,” political analyst and economic journalist Paolo Benza recently told the regional news outlet Diálogo.

Under the Biden administration, the threat has been treated as a call to action for the United States to ramp up its own supply chains for critical materials as well as domestic capacities for their extraction, manufacturing, and refinement. However, Washington has struggled to make inroads for the import of critical materials such as South American lithium, whereas China has already developed well-established trade relations in these markets.

Under Trump, however, these tensions could transform from policy goals into potential sources of geopolitical and just plain political conflict. As the Council on Foreign Relations recently reported, “the reelection of Donald Trump, who has promised a wide array of trade measures, including tariffs on Mexico, could signal a significantly more confrontational approach to China in the Western Hemisphere.”

While Trump’s approaches are highly contentious and potentially even dangerous according to some experts, they are not without provocation. China’s own approach – rapidly expanding its presence in emerging markets through its mass-scale Belt and Road global infrastructure initiative – is seen by many experts as a flagrant political power-grab more than a mere economic gain. “The United States and its allies [...] fear that Beijing is using these relationships to pursue its geopolitical goals—like the further isolation of Taiwan—and bolster authoritarian regimes such as those in Cuba and Venezuela,” the Council on Foreign Relations report went on to say.

China is currently South America’s largest foreign trading partner, providing massive amounts of direct investment as well as credit. Beijing has also strengthened military ties with several nations including Venezuela, whose authoritarian regime has isolated the country from the Western world by way of heavy economic sanctions. China’s willingness to trade with and even cozy up to Venezuela and China not only allows those governments economic relief but provides considerable leverage and influence to Beijing.

By Haley Zaremba for Oilprice.com