Beijing is gradually linking South America together with its massive investments in infrastructure—right under Washington’s nose.
In November 2024, Chinese president Xi Jinping personally inaugurated the construction of a port in Chancay, Peru, with an initial $1.3 billion investment. Operated and majority-owned by COSCO, a Chinese state-owned shipping enterprise, Puerto Chancay is now the largest and most influential deep-water port on South America’s Pacific Coast. It already gives the People’s Republic of China (PRC) critical access to South American minerals and agriculture. But it could also do much more; the Pentagon has warned about Puerto Chancay’s dual-use potential for naval offensives against the US homeland.
China’s Peruvian port may be its most significant strategic win to date on the American continent, but it is not its first. Over the past two decades, while the United States tried to develop democracies abroad, China has been quietly building an infrastructure empire across Latin America and the Caribbean, with the aim of economically and militarily alienating the continent from US interests.
The PRC’s weapon of choice in this offensive has been state-backed financial investment schemes. China’s banks are now a leading source of investments for Latin American nations, particularly those with high energy or trade significance. And those investments are progressing. In May of 2025, Colombia became the latest Latin American nation to join the Belt and Road Initiative (BRI).
This represents a critical win for Beijing, because Bogotá was once a key US ally. In recent years, however, Colombia has tilted toward China and regional American adversaries under its first leftist president, Gustavo Petro. Colombia now joins two-thirds of South American nations as a member of the BRI, granting Beijing significant political and economic influence over the Western Hemisphere through its de facto control of valuable infrastructure projects and expansive loan collection.
Not everything is going China’s way, however. Panama recently filed a lawsuit against the Chinese operators of two ports, respectively located at each end of its vital canal, after Beijing halted the ports’ sale to US companies. With financial control over the Panama Canal fleeting, China has turned to alternate trade routes to project power. Its backup runs through Chancay via the new shipping schedule WSA5, which directly connects Shanghai and Qingdao, China, to South America. This single line, spanning South America’s west coast, is the first to directly connect Colombian, Ecuadorian, and Peruvian ports to China and is projected to lower delivery costs by 20 percent.
All of this is part of a larger strategic approach. China’s port investments unlock a network of Chinese-funded critical mineral extraction sites in Latin America—the most consequential of them being lithium mines in Bolivia. Last year, Chinese firms finalized an initial $1 billion investment deal to build lithium mines in Bolivia’s Uyuni salt flats and produce over 35,000 metric tons of lithium annually. These ports and mines could be connected by a planned transcontinental railroad from Chancay to Brazil, with stops in Bolivia, capable of transporting critical minerals back to Mainland China’s manufacturing hubs.
All of this is a problem for America. It is becoming abundantly clear that, to efficiently counter the PRC’s long-running international development finance schemes, the United States will need to redevelop its own. Without an effective US international development finance strategy, Beijing will continue to monopolize its lender status in the Western Hemisphere.
For the Trump administration, the answer lies in mobilizing American capital, and its greatest asset is the International Development Finance Corporation (DFC). Originally established by the BUILD Act of 2018 to make strategic foreign investments, the DFC raises capital in two key ways: direct investments funded by Congress and profits from previous investments. It can also encourage private capital from American firms, which otherwise might be cautious about investing in critical projects and unstable environments, by providing credit subsidies and risk insurance. Essentially, the DFC can focus American public and private sector influence toward the South American infrastructure of national security interest.
Unfortunately, the DFC is not yet ready to compete with China. Under the previous administration, the DFC was subject to USAID-like funding misallocations and other irregularities. Now, the White House needs to reconfigure the DFC for a narrowly tailored national security mission.
The opportunities to do so abound. The DFC could absorb funding previously allocated for USAID into its requested $803 million in discretionary funding for FY2026. In turn, expanding the DFC’s budget would help it gather US private capital to invest in developing nations. And a greater congressional allocation would allow the DFC to provide greater credit subsidies for insurance, allowing it to undertake riskier loans in key projects at lower interest rates, thereby making it competitive with China’s state-backed rates and investments. Over time, with the proper strategic investments, the DFC should be able to fund its own national security mission—because a larger bank account for investments in successful foreign projects will yield larger profits.
For that to happen, though, the DFC will need to liberalize its loan restrictions to enable it to invest in the entirety of South America without a lengthy regulatory process. Currently, the DFC’s services are restricted to poorer developing nations of relatively low relevance. They can’t be, because China’s BRI has no corresponding restrictions. That relative freedom has allowed Beijing to establish stakes in higher-income but strategically critical nations like Colombia, Peru, Brazil, and Chile.
If the DFC wants to compete with Chinese capital, the White House will need to level the economic playing field by optimizing its mission and reach. It will also need to align the agency better with national security priorities and harness it as a tool in the pursuit of strategic investments abroad. South America, meanwhile, seems like the best place to start.