Latin America is not drifting back into Washington’s orbit out of nostalgia. Governments, firms and voters across the region are working through a more prosaic calculation. They want investment that arrives on time, markets that absorb their exports, and technology that can raise productivity without dictating domestic politics. Supply chains are being rewired, Chinese finance is more selective, Europe is distracted by its own crises, and Latin American leaders are scanning the horizon for partners who will stay engaged over the long haul. In that setting, the United States occupies a position that is less sentimental than indispensable.
The question in Washington is whether this moment is treated as a temporary advantage produced by U.S.–China rivalry, or as the basis for a long term economic and strategic project in the hemisphere. The window is open, but it is not guaranteed to stay that way.
A shifting balance between Washington and Beijing
For two decades, China transformed the economic map of South America. It became the main trading partner for Brazil, Chile, Peru and others, with state owned and private firms embedded in energy, mining, transport corridors and even space cooperation. Chinese companies operate or are building port terminals across Latin America and the Caribbean, which has started to worry U.S. defense planners who look at logistics and sealift capacity before they look at trade statistics.
That expansion has not stopped, but its character is changing. Beijing’s Belt and Road portfolio has tilted toward regions that present fewer political and regulatory surprises. Latin America’s share of new construction and investment has shrunk, and Chinese institutions are more cautious in their exposure to governments that swing between left and right and where local opposition can derail high profile projects. Slower Chinese growth and a rebalancing of its own economy have also cooled demand for some Latin American commodities. Exporters that built their fiscal and development strategies around a permanent China boom are discovering the limits of that bet.
At the same time, the United States has moved from being taken for granted to being courted again, not because it has suddenly become loved but because its market and currency occupy a central place in the risk calculations of governments and boardrooms. Mexico has overtaken China as Washington’s leading goods trading partner, with hundreds of billions of dollars in two way trade. Central American and Caribbean economies have carved out niches in medical devices, electronics components and business services that feed U.S. value chains. Region wide, foreign direct investment is growing again, and nearshoring to the U.S. market is one of the main drivers.
The result is not a simple story of Chinese retreat and U.S. restoration. Both external poles matter greatly to Latin America, and many governments want to keep it that way. Yet the combination of more selective Chinese engagement and corporate pressure in the United States to bring production closer to home has created a rare alignment: U.S. firms are looking south for reliable partners, and a critical mass of Latin American governments are open to deeper ties, provided they can preserve autonomy.
What the “embrace” looks like
The new warmth is easiest to see in data, not in speeches.
Mexico illustrates the depth of integration. Under USMCA, rules on regional content and labor have locked in a model where manufacturing for the U.S. market depends on Mexican plants, workers and logistics. U.S.–Mexico trade now rivals or surpasses that with any other partner, and Chinese companies themselves are investing in Mexican facilities to reach the North American market. This is the core of a wider North American production space that is unlikely to unravel, even when tariff threats from Washington introduce noise and uncertainty.
Further south, small and mid sized economies show how nearshoring works in practice. Costa Rica and the Dominican Republic export sophisticated medical devices and electronic components; Panama sells logistics services, data connectivity and financial intermediation; Honduras and others are trying to move up from assembly into more complex manufacturing and services. For these countries, the U.S. market is not simply one destination among many. It is the gravitational center that shapes tax regimes, infrastructure plans and education strategies.
Brazil and the Southern Cone form another pattern. Brazil remains structurally linked to China through soy, iron ore and oil exports, and Chinese investment in energy and infrastructure is deeply entrenched. At the same time, Brazilian policymakers know they need technology, capital and political access in Washington and Brussels to reach their ambitions in agritech, renewable energy, digital services and aircraft manufacturing. Argentina, Chile and Uruguay are exploring positions in global value chains for software, green hydrogen, batteries and other higher value activities, with investors from the United States, Europe and Asia competing for a foothold.
Across the Andean critical minerals belt, the stakes are even clearer. Peru, Chile, Argentina and Bolivia sit on copper and lithium reserves that are central to any credible global energy transition. Chinese, U.S. and European firms, along with regional players, are locked in a competition that is about more than mine concessions. Governments are trying to shift from raw exports to some mix of processing and manufacturing at home, and they are looking for partners who can bring technology, environmental standards and market access, not just fast cash.
In every subregion, the constant is the centrality of the U.S. market and financial system. Latin America’s current “embrace” of the United States is not an act of ideological alignment. It is a bet that long term access to U.S. consumers, capital and technology offers the best route to growth and resilience, provided the terms are not suffocating.
Washington’s leverage and its incoherence
Seen from Washington, this landscape solves one strategic problem. The United States does not need a campaign to “return” to Latin America. It never left in economic terms. It remains the leading trade partner and investor for a large part of the region, the main external market for most economies, and the anchor of the regional financial system. The dollar’s role in trade invoicing and reserves, the dominance of U.S. technology in digital infrastructure, and the pull of its labor market together give Washington a structural leverage that China cannot easily replicate.
The unresolved problem is how to use that leverage coherently. U.S. policies toward the region are still fragmented across bureaucratic and political silos. Trade debates focus on tariffs for specific sectors and disputes with Mexico and China. Security debates center on fentanyl, migration and organized crime. Climate policy has its own vocabulary and forums. Development finance runs through a tangle of agencies with overlapping mandates and limited coordination.
China, even in a more cautious phase, presents something closer to a single package. Lending, construction companies, equipment supply and political signaling are linked. Latin American leaders know that the terms can be opaque and the risks significant, yet they understand the offer. By contrast, Washington can appear reactive, with initiatives that arrive in bursts during summits or crises and then fade.
If the United States wants to leverage the region’s current openness, it needs to treat the hemisphere as the backbone of its own long term economic and security resilience, not as an afterthought to Indo-Pacific competition or domestic culture wars. That implies a shift from episodic gestures to a project with three intertwined purposes: embedding Latin America in secure supply chains, supporting regulatory and democratic standards that are compatible with U.S. interests, and building shared capacity in the technologies that will define the next industrial cycle.
Turning nearshoring into strategy
Nearshoring is already under way, driven by firms that seek shorter supply chains, reduced shipping risk and some insulation from tensions with China. Analysts can track the switch in U.S. import patterns from parts of Asia toward Mexico, Central America and segments of South America. What is mostly missing is a political frame that treats this shift as a joint endeavor rather than a series of private decisions.
A more strategic approach would start by spelling out that secure supply chains in the Western Hemisphere are public goods that benefit both sides. That logic could then guide the extension of some USMCA disciplines across a wider set of sectors and partners, not through a single grand trade agreement that is unlikely to pass Congress, but through a patchwork of narrower accords on autos, medical devices, electronics and agrifood. If firms can design production networks that span North America, Central America and parts of South America under relatively predictable rules, the region as a whole becomes more competitive.
Financing is the second pillar. Nearshoring is constrained by ports that cannot handle modern cargo volumes, energy systems that lack reliability, congested or missing rail links and patchy digital backbones. U.S. institutions such as the Development Finance Corporation and EXIM Bank, combined with multilateral lenders, could focus on these enabling investments, especially where they unlock private capital. The key is to match financial instruments to realistic project pipelines rather than announce headline figures that never materialize.
A third element concerns standards. For supply chains to function as a single production space, products, data and services must move under compatible technical and regulatory rules. That requires a quiet, sustained effort to align norms in areas such as digital trade, data protection, cybersecurity, technical specifications for key inputs, and labor and environmental practices. If the United States and willing Latin American partners can converge on workable standards, the hemisphere can operate as an integrated platform rather than a patchwork of disconnected national regimes.
Competing with China without a crusade
China’s most visible footholds in Latin America are in physical infrastructure, energy and raw materials. Its companies operate a network of port terminals, provide equipment for electricity grids and telecoms, and invest heavily in copper and lithium. The United States cannot erase this presence, and trying to force governments to choose sides outright would be self defeating.
A smarter competition would focus on specific nodes where strategic risks are highest and where Western firms have comparative advantages. Some ports and logistics hubs are vital for U.S. military planning and trade routes; others are commercially important but less sensitive. Mapping and prioritizing these nodes can guide where U.S. and allied financing should concentrate to provide alternatives to Chinese operators and to avoid single operator choke points.
In critical minerals and energy, many Latin American governments now insist on more local processing, higher environmental standards and better labor conditions. Those demands complicate the traditional extractive model. They also play to strengths of many Western companies, which are more accustomed to operating under strict compliance and disclosure regimes. If Washington aligns its financing tools and diplomatic engagement with the region’s own push for value addition in batteries, copper processing, green hydrogen and related sectors, it can offer a credible counterweight that does not frame the issue as a simple attempt to block Chinese deals.
Digital infrastructure and data governance are another arena where influence can be exercised even when Chinese hardware is present. Support for secure network architectures, transparent procurement, independent regulators and shared cyber defense practices can reduce the potential for coercive leverage through digital means and reinforce democratic norms.
Governance and security as shared statecraft
Latin America’s structural weaknesses are well known: modest trend growth, high inequality, fiscal constraints and fragile institutions. These are the conditions in which organized crime, corrupt networks and populist movements thrive. U.S. politics often compress the region into two problems, narcotics and migration. That focus is politically understandable inside the United States, but it narrows the strategic conversation.
A more ambitious agenda would treat security and governance as domains where the United States and Latin American states can build capacity together. Support for the digitalization of tax, customs and justice systems can make it harder to hide assets, easier to pay taxes and faster to resolve disputes. Cooperation on financial intelligence can track the money of criminal organizations across borders in ways that traditional counternarcotics work cannot match. Climate adaptation and disaster response programs, if designed with local authorities, can help extend state presence into areas where criminal groups fill the void.
For societies that have lived through repeated cycles of U.S. pressure on drug policy and migration enforcement, a visible U.S. role in building effective public institutions would mark a real change. It would also serve U.S. interests by making neighboring states more resilient.
One region, several strategies
Any hemispheric strategy that ignores the diversity of Latin America is doomed. Mexico anchors a North American production system that already exists. Central America and the Caribbean are fragile but increasingly important for manufacturing and services. Brazil and the Southern Cone combine middle income status with ambitions to influence global rulemaking. The Andean states that sit on critical minerals must reconcile local social demands with global pressure for fast extraction.
In the North American core, the central task is to stabilize expectations. Unilateral U.S. tariffs on Mexican goods unsettle investors and can undermine confidence in the rules of USMCA. A credible approach would pair firm enforcement of agreed standards with clear political commitments to preserve Mexico’s privileged access. Linking these commitments to joint efforts on fentanyl, border management and workforce development would help show U.S. voters that integration delivers tangible benefits.
In Central America and the Caribbean, the opportunity is to shape an emerging production base into a coherent corridor that combines investment, trade preferences and legal migration channels. If energy systems are upgraded, water security is improved and ports and digital connections are modernized, the same countries that now send large numbers of migrants north could become pillars of U.S. supply chain resilience.
With Brazil and its Southern Cone neighbors, Washington needs a language of co-leadership. These states will not align automatically with U.S. positions on China, Russia or Middle East conflicts. They are, however, essential for meaningful progress on issues such as Amazon protection, global carbon markets and standards for green industrial policy. Structured partnerships in these domains can bind them into a broader Western agenda without pretending that disagreements do not exist.
In the Andean critical minerals belt, the United States must decide whether it is willing to back local industrial strategies that seek to capture more value at home, even when those strategies are advanced by governments that are skeptical of U.S. power. Offering technology, environmental safeguards and access to North American markets for higher value products, not only raw materials, would be a concrete test of that willingness.
A conditional embrace
Latin America’s current receptiveness to deeper ties with the United States is contingent. The region has a long memory of moments when Washington promised partnership and delivered neglect, or tried to manage local politics directly. Chinese and European actors, even in a more constrained phase, remain available alternatives. Governments and firms are therefore hedging. They are inclined to anchor their future in U.S. markets and technology, but they will look elsewhere if Washington appears unreliable, erratic or dismissive of their autonomy.
For the United States, the stakes are larger than the hemisphere itself. Secure supply chains based in the Western Hemisphere, neighbors resilient to economic and political shocks, and a shared regulatory environment for digital systems, energy and critical minerals are central to U.S. influence in a more competitive world. Latin America’s pragmatic embrace offers a chance to build that foundation.
If Washington can align its tools and politics with that opportunity, the result could be a durable partnership that enhances prosperity and security on both sides of the equator. If it fails, others will be ready to occupy the space once again, on terms less favorable to U.S. interests and often less favorable to Latin American societies as well.
