China is growing its economic influence in Latin America through multibillion-dollar mining investments. In the process, it is undermining labor and environmental standards in the region. Meanwhile, the U.S. government is largely inactive in Latin America’s minerals sector. Washington seems content to promote advanced U.S. downstream manufacturing, like semiconductor and battery factories, that source upstream minerals from Chinese-controlled mines and refineries.
As U.S.-China competition intensifies, America’s China-dependent mineral supply chains — and the U.S. economy and military they support — grow more precarious. And with soaring global demand for electric vehicles, available supplies of critical minerals will constrict.
For the United States, Latin America can be a key mineral supplier. “Brazil could be a very valuable partner in finding critical minerals. It’s not only Brazil. Argentina, Chile, Peru—we’ve got to do more in this hemisphere,” noted U.S. State Department Under Secretary for Economic Growth, Energy, and the Environment Jose Fernandez. To both strengthen America’s supply chains for critical minerals and counter China’s influence in Latin America, the U.S. government should prioritize development loans for U.S. companies to acquire mining projects in Latin America. This would incentivize U.S. banks to finance and invest in these projects, too. Importantly, U.S. government investment would also raise labor and environmental standards in the region’s mining sector.
Steps to Secure Critical Minerals
To date, the U.S. government has focused on international collaborations like the Minerals Security Partnership (MSP) and the Americas Partnership for Economic Prosperity in hopes of securing critical mineral supply chains and countering China’s influence in Latin America. The MSP seeks to strengthen critical mineral supply chains among U.S. partners and mineral-rich countries. But no mineral-rich Latin American country is a member, although Argentina and Brazil attended the inaugural MSP meeting as observers. So far, the U.S. government’s only direct investment in Latin America’s mining sector was the U.S. Development Finance Corporation (DFC) investing $30 million in TechMet for developing a nickel-cobalt mine in Brazil.
To actually strengthen critical mineral supply chains, the U.S. government must deploy significant capital — at a minimum, hundreds of millions of dollars — to U.S.-led critical mineral projects.
First, the U.S. government should provide loans to U.S. companies for acquiring existing Latin American mines, or the companies that own such mines. Similar to the Chinese government, the U.S. government should direct the DFC and the Export-Import (EXIM) Bank to prioritize such loans, including those directed toward mine acquisitions in Latin America. U.S. banks are more likely to lend to or invest in U.S. majority-owned mining projects in Latin America if the U.S. government is partly financing the acquisitions and partly protecting them from default risk.
Washington should mainly provide financing to U.S. companies acquiring mines that reduce American import dependence on China and Russia — such as those producing graphite and bismuth. Critically, the U.S. government should require that all the partially processed material from acquired mines in Latin America be shipped to and refined in the United States in order to grow U.S. refining capacity for critical minerals.
Second, the U.S. government should provide loans to U.S. companies for developing new mines in Latin America. New mines require significant upfront capital, but mining companies often struggle to secure the necessary loans with reasonable terms, given lending risks such as the possibility a host country could nationalize or quasi-nationalize the mines. Thus, the U.S. government would play a key role, providing “anchor money” in a Latin American mine that could attract other U.S. capital.
Like the mine acquisition stipulations, the U.S. government should only finance mining projects for minerals when the United States lacks enough domestic reserves to satisfy domestic demand. And again, the government should also require all the partially processed material from these mines to be refined in the United States.
Finally, the executive branch should adopt rules and Congress should pass legislation expanding lending to U.S.-led mining projects in Latin America. Pursuant to existing executive orders on securing supply chains, the DFC — with its $60 billion investment cap — should adopt rules that prioritize financing for such projects in mineral-rich Latin American countries.
Just as the Export-Import Bank of China prioritizes lending to Chinese companies seeking to secure overseas mines, Congress should prioritize EXIM lending to U.S. companies seeking to invest in and operate overseas mines. Congress should also permanently increase EXIM’s 2 percent statutory default cap to 4 percent for lending to key sectors such as critical minerals. Moreover, pursuant to existing executive orders on securing supply chains, EXIM should reserve part of the $27 billion in financing authority from EXIM’s China Transformational Export Program for U.S.-led mines in Latin America.
The DFC likely has legal authority to lend to critical mineral projects in Latin America, as the DFC has already invested in a nickel-cobalt mine in Brazil. Furthermore, the DFC’s development strategy prioritizes “climate-focused investment,” and, in DFC’s own words, critical minerals in Latin America “support the global clean energy transition.” The DFC also seems eligible to lend to overseas mining projects, since DFC leaders met with company executives about building mining capacity in the Democratic Republic of the Congo.
The EXIM Bank’s authority to lend to U.S.-led critical mineral projects in Latin America is less clear. The EXIM Bank is focused on growing U.S. exports, but it has expressed interest in lending to a U.S. critical mineral project, and U.S. Under Secretary Jose Fernandez named EXIM Bank in a speech highlighting U.S. investment and financing for overseas critical mineral projects.
Enough Talk, Start Buying Mines
The DFC and EXIM Bank therefore must ensure that lending to U.S.-led critical mineral projects in Latin America sits within their existing legal authority. if it is, they should update their operating procedures to prioritize lending to such projects.
If these projects are not within their existing authority, the DFC and EXIM Bank should see if they can issue new federal rules that reinterpret existing laws on their lending practices. If they can, they should propose new rules to prioritize lending for U.S.-led critical mineral projects in Latin America. If the agencies cannot make internal changes or propose new federal rules that enable lending to U.S.-led critical mineral projects in Latin America, they should propose such legislation to Congress.
As U.S.-China competition escalates, China is increasing its influence over America’s neighborhood and its minerals. To both strengthen America’s supply chains for critical minerals and counter China’s influence in Latin America, the U.S. government should prioritize development loans for U.S. companies to acquire mining projects in Latin America. This would incentivize U.S. banks to finance and invest in these projects, as well as raise labor and environmental standards in the region’s mining sector. In short, the United States needs to do more than talk in Latin America. It needs to start acquiring critical mineral mines.
Gregory Wischer is the principal of Dei Gratia Minerals, a critical minerals consultancy. Juan Pablo Villasmil is a Latin America specialist researching China’s influence in the region.
