The Spread of U.S.-China Hegemonic Competition to Latin America: Fronts in Supply Chains, Telecommunications, and Rare Earths, and South Korea’s Response

Executive Summary

U.S.-China competition in Latin America is expanding to new fronts in supply chains, telecommunications, and rare earths. China has built a track record of tangible, hard-to-reverse investments at the local government level, such as Colombia's metro system and Peru's Chancay port. The United States, in contrast, relies on policy announcements like telecommunications security warnings and sanctions relief, but the actual deployment of capital has not kept pace. The most probable scenario is the entrenchment of parallel competition, where localized friction recurs in different countries without a clear winner. Rather than choosing a side, South Korean companies should prioritize securing dual access by participating in Brazil's rare earth refining sector and establishing separate bilateral channels with resource-rich nations.

I. Analysis of the Current Situation

U.S.-China Hegemonic Competition Expands to Latin American Supply Chains, Telecommunications, and Rare Earths: An Analysis of the Current Situation

1. Background and Developments

China's economic presence in Latin America is the result of gradual accumulation over the past two decades. A recurring pattern has emerged where Chinese investment follows political shifts, such as countries severing diplomatic ties with Taiwan to recognize Beijing [4]. Peru's Chancay port is a prime example. Initially presented as a commercial logistics facility, the port has, over time, revealed its character as a strategic asset [4]. The British defense intelligence firm Janes characterizes China's engagement in Latin America as "a long-term strategic challenge for influence with security implications, not simply an economic issue" [4].

Colombia is a prime example of a country experiencing this trend at the municipal level. Andrés Santamaría Garrido, head of a Colombian association of cities, described Beijing's commercial diplomacy as "proactive, pragmatic, and hard to ignore" while in his Bogotá office with a model of the metro being built by a Chinese consortium [5]. He explains that Chinese companies have an edge in price competitiveness, sustainability, and ease of collaboration [5].

2. Current Situation

Since the start of the Trump administration, the United States has intensified diplomatic pressure to reverse this structure, but the *Buenos Aires Times* assesses that "Trump has failed to loosen China’s economic grip on Latin America" [5]. In Argentina, it has also been noted that U.S.-China competition over the Vaca Muerta shale field, the Paraná-Paraguay Waterway (Hidrovía), and infrastructure in Patagonia is surfacing "like an uncontrollable fountain in the fertile soil of domestic debate" [15].

Conflict in the technology sector surfaced in the Dominican Republic this past August. The controversy began when the U.S. Embassy in Santo Domingo posted Washington's warnings about Chinese companies—including Huawei, ZTE, Hikvision, Hytera, Dahua, and DJI—on its social media accounts [12]. The Chinese side retorted, labeling it "technological threats and coercion" [12]. Regarding Nicaragua, U.S. diplomat Segura labeled these products as "high-risk technology," stating that "Chinese law compels these suppliers to cooperate with Beijing's intelligence agencies, creating risks of espionage, hacking, and network disruption" [1]. He urged partner nations in the Americas to switch swiftly to trusted suppliers [1].

In Venezuela, the United States has responded with the indirect tool of sanctions relief. The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued two general licenses authorizing transactions related to the state-owned telecommunications company CANTV and the mobile carrier Movilnet [10]. The *South China Morning Post* interpreted this as a move by Washington to expand its front of containment against China from the oil sector to the telecommunications sector, assessing it as a move that puts the long-standing strongholds of Huawei and ZTE to the test [10].

In Ecuador, the U.S. approach to Latin America has itself been put to the test. *Foreign Policy* assesses that Washington has "prioritized bullets over business" with the low-growth nation of Ecuador, pointing to President Noboa's visit to China as a consequence [14]. In Brazil, a retreat in the U.S. position in the resource competition has been publicly acknowledged. In an impromptu speech at the Exposibram conference hosted by the Brazilian Mining Institute in Minas Gerais state, Brazil's Minister of Mines and Energy revealed that the Trump administration had effectively admitted its inferior position in the rare earths competition with China [8]. Along with this remark, a large-scale U.S. investment plan for South American rare earth mines was also unveiled [8]. The Associated Press reports that Brazil, possessing the world's second-largest rare earth reserves after China, is being courted by the United States and other countries, while also noting growing environmental concerns in the Amazon region [16].

3. Key Actors and Positions

The United States is taking an approach of accumulating countermeasures at the level of individual departments, such as the Department of State and the Department of the Treasury. The core policy is to define Chinese telecommunications equipment as a security threat and press for a transition to trusted supply chains [1][12]. However, as seen in the case of sanctions relief for Venezuela, it is demonstrating a dual approach that combines principled pressure with pragmatic exceptions [10].

China has repeatedly followed a pattern of expanding its influence through pragmatic expansion at the level of local governments, state-owned enterprises, and private companies, rather than through grand declarations from the central government [2]. It is characterized by its method of strengthening relationships with local and municipal governments through individual infrastructure projects, such as Colombia's metro and Peru's Chancay port [4][5].

Individual Latin American countries like Colombia and Ecuador are actors pursuing practical interests between the United States and China. Santamaría's mention of "price and sustainability" shows that these countries are choosing partners based on practical calculations rather than ideology [5]. The Noboa administration's visit to China is also interpreted as a reaction to Washington's security-focused approach failing to meet their economic needs [14].

As a resource-rich nation, Brazil is leveraging its bargaining power to pursue a strategy of keeping its doors open to both the United States and China. The Minister of Mines and Energy's remarks demonstrate a balanced stance, publicly acknowledging the U.S.'s inferior position while simultaneously announcing efforts to attract American investment [8].

4. Key Issues

The first issue is the securitization of telecommunications and technology infrastructure. Washington is formalizing a narrative that links Chinese equipment from companies like Huawei, ZTE, and Hikvision to risks of espionage and hacking [1][12]. China counters this as "technological coercion," and this war of narratives has itself surfaced as a diplomatic conflict [12].

The second issue is the gap between U.S. policy and local economic realities. Both the *Buenos Aires Times* and *Foreign Policy* point out that pressure-based diplomacy has failed to reverse Colombia's urban infrastructure projects or Ecuador's engagement with China [5][14].

The third issue is the U.S.'s strategic shift regarding rare earths. The United States is pivoting toward cultivating Brazil as an alternative hub, having itself acknowledged its inferior position in the mineral competition with China [8]. In this process, environmental issues in the Amazon are emerging as a new political variable [16].

II. In-Depth Analysis

U.S.-China Hegemonic Competition Expands to Latin American Supply Chains, Telecommunications, and Rare Earths: An In-Depth Analysis

1. Analysis of Root Causes

The emergence of Latin America as a new front in U.S.-China competition is rooted in a fundamental mismatch between Washington's policy priorities and the pragmatic interests of Latin American countries. Since the Cold War, the United States has treated Latin America as an object of security management. Citing the case of Ecuador, *Foreign Policy* assesses that Washington has "prioritized bullets over business" [14]. Counter-narcotics operations against cartels and immigration control have been central to its policy, while infrastructure investment and industrial cooperation were secondary issues.

China's approach, by contrast, has prioritized commercial and practical interests from the outset. Santamaría, the head of the Colombian association of cities, summarizes the strengths of Chinese companies as price, sustainability, and ease of collaboration [5]. This pragmatism has created a pattern where expanded investment follows political turning points, such as the severing of ties with Taiwan [4]. In other words, China has pursued a strategy of accumulation, converting the political asset of diplomatic recognition into the physical asset of commercial infrastructure, while the U.S. is stuck in a position of belatedly offering alternatives.

Another root cause of this gap is the difference in methods of capital mobilization. The U.S. response is often limited to sanctions relief or the issuance of warnings by individual departments like State and Treasury. OFAC's issuance of a general license for Venezuela's telecommunications sector is a case in point [10]. China, on the other hand, consistently executes tangible investments at the level of state-owned enterprises and local governments. It builds a track record of visible construction projects, like the Colombian metro consortium and Peru's Chancay port [4][5]. Warnings and sanctions may block an opponent's entry, but they cannot provide a tangible alternative to replace already-built infrastructure.

2. Structural Context

Political Structure

Many Latin American countries are in a difficult political position, unable to afford being forced to choose between the United States and China. In Argentina, U.S.-China competition over the Vaca Muerta shale field, the Paraná-Paraguay Waterway (Hidrovía), and Patagonian infrastructure has shown a tendency to spill over into domestic political debates [15]. The *Buenos Aires Times* describes this phenomenon as surfacing "like an uncontrollable fountain" [15]. This illustrates a structure peculiar to Latin America, where foreign policy and security issues do not remain purely in the realm of external affairs but are consumed as fodder for domestic political conflict.

The case of Ecuadorian President Noboa opting for a visit to China out of disappointment with the U.S.'s security-focused approach is part of the same context [14]. Countries suffering from low growth show a clear tendency to prefer partners who offer immediate economic results over security cooperation.

Economic Structure

China's economic influence is most robustly maintained in urban-level infrastructure projects. The method of contracting directly with local governments, as with the Colombian metro project, is an area difficult for Washington's central government-level pressure to reach [5]. This is similar to the structure EAI previously identified in the case of African cobalt. China has expanded its influence "through pragmatic expansion at the level of local governments like Hunan province and state-owned and private enterprises, rather than through central government declarations" [2]. The same infiltration route—contracts at the local and municipal government level—is observed in Latin America.

In the rare earths sector, Brazil is emerging as a new structural variable. Brazil's rare earth reserves are the second largest in the world, after China's [16]. The United States has reached a point where it acknowledges its own assessment of falling behind China in the rare earths competition. Brazil's energy minister, in an impromptu remark at a conference hosted by the Brazilian Mining Institute, revealed that the Trump administration had admitted this [8]. The problem is not mining, but refining and processing capacity. The same structural vulnerability the U.S. faced with African cobalt—namely, continued dependence on China for refining, separate from securing the raw ore—could be replicated in Brazil [2].

Security Structure

The U.S. security narrative is taking shape around telecommunications infrastructure. A U.S. diplomat, speaking about Nicaragua, labeled products from companies like Huawei and ZTE as "high-risk technology," on the grounds that Chinese law compels its telecom equipment suppliers to cooperate with intelligence agencies [1]. In the Dominican Republic, the U.S. Embassy also issued a warning explicitly naming Huawei, ZTE, Hikvision, Hytera, Dahua, and DJI, which the Chinese side countered as "technological threats and coercion" [12]. This security narrative surrounding telecommunications equipment is a result of the core conflicts of the U.S.-China tech competition—over semiconductors, 5G, and AI—being transplanted to Latin America [6][11].

The case of Venezuela illustrates the point where security logic and economic logic intertwine. The United States simultaneously eased sanctions on the telecommunications sector while taking the contradictory measure of undermining the strongholds of Huawei and ZTE [10]. This reveals Washington's dilemma, where the security tool of sanctions becomes subordinate to the economic objective of adjusting market access.

3. Comparison with Historical Precedents and Similar Cases

The way the Latin American front is developing overlaps significantly with the competition over African cobalt. In the DRC, the United States announced a $3 billion investment in the Lobito Corridor, but the actual pace of private capital deployment fell short of the announcement [2]. In Colombia and Ecuador as well, U.S. pressure remains at the level of diplomatic warnings and sanctions adjustments, with no corresponding large-scale, tangible investment yet apparent [5][14]. Just as the DRC secured independent bargaining power through an ore export ban, Brazil may attempt similar positioning, using its rare earth reserves as leverage to extract favorable terms from both the U.S. and China [2][8].

In terms of the spread of the technology security narrative, it is notable that this phase is occurring in parallel and without a time lag with the escalating regulatory conflicts over semiconductors and AI ahead of the U.S.-China summit. Just as the FCC's accumulation of tech regulations against China was assessed to have been triggered not on a "summit diplomacy track but on a bureaucratic track at the regulatory agency level" [11], the telecommunications conflict in Latin America is following a similar path, starting with individual communications at the State Department and embassy level and escalating to a summit-level agenda item. The fact that the controversy in the Dominican Republic was sparked by a post on an embassy's social media account supports this view [12].

4. Key Variables Shaping Future Developments

The first variable is the outcome of the anticipated Trump-Xi Jinping summit next month. If the summit leads to an easing of technology regulations or an agreement on managing competition, the intensity of the telecommunications conflict in Latin America could be temporarily adjusted. However, given that the flashpoints of the conflict are at the level of individual embassies and regulatory agencies rather than summit diplomacy, there is a high probability that localized friction will continue regardless of the summit's outcome [11].

The second variable is the pace of U.S. tangible investment deployment. The key will be when announced investments in projects like Brazilian rare earth refining facilities or alternative infrastructure in Ecuador and Colombia translate into actual capital deployment. As confirmed in the African case, the larger the time lag between announcement and deployment, the more entrenched the host country's dependence on China becomes [2].

The third variable is whether resource-rich Latin American countries, including Brazil, can secure independent bargaining power. If they can elicit competitive proposals from both the U.S. and China regarding raw material export conditions or securing value-added in the processing stage, a DRC-style parallel track could be replicated in Latin America [2]. Conversely, if domestic political conflicts absorb foreign policy issues, as in the Argentine case, it cannot be ruled out that shaken policy consistency could lead to a de facto acceptance of the persistence of existing Chinese infrastructure [15].