Development or Dependence? Rethinking China’s Economic Playbook in the Americas

By Leland M. Lazarus, Guido L Torres

Introduction

“Economic security is national security.” This core principle, long echoed across the U.S. interagency—from the White House’s National Security Strategy to Treasury and Commerce policy directives—has gained renewed urgency as strategic competition intensifies in the Western Hemisphere. In no place is this more evident than in Latin America and the Caribbean, where economic statecraft has become the terrain of contestation.

For three years, this slogan permeated out of U.S. Southern Command (SOUTHCOM), stressing that a nation’s economic and national security are intertwined and that economic over-reliance on China could infringe on Latin America and the Caribbean (LAC)’s sovereignty. While the slogan certainly resonated in Washington, we often discussed with colleagues in the region whether LAC citizens felt the same way.

Oftentimes, they didn’t. Part of the reason is the U.S.’s own fraught history of imperialism in the region, where it militarily intervened in LAC countries dozens of times under the infamous Monroe Doctrine. In the minds of some LAC leaders, U.S. warnings about Chinese threats to their economic and national security come off as hypocritical.

That being said, it is disappointing that the same kind of domestic political discourse in many LAC countries where politicians jealously guard their sovereignty from the clutches of a Monroe Doctrine 2.0 doesn’t also include the same fervent effort to protect their sovereignty from China.

Beijing often cloaks its regional projects in strictly commercial language, but the substance is strategic: using economic leverage to shape the policy behavior of smaller states. In LAC, this coercion is increasingly subtle, pervasive, and effective. China’s tactics constitute a form of irregular warfare as old as Sun Tzu’s Art of War. An ancient Chinese idiom captures this approach well: ‘subdue the enemy without fighting.’ Therefore, LAC countries must identify when and how China is deploying economic coercion, and develop strategies to successfully counteract them and proactively protect their sovereignty.

The following table illustrates all instruments wielded by Chinese embassies.

Irregular Warfare Framed through DIME-FIL

Economic Statecraft as Irregular Warfare

At the heart of China’s statecraft is a global network of state-owned enterprises (SOEs), policy banks, politically connected private firms, Chinese diaspora leaders, and local businesspeople. These actors extend China’s reach through infrastructure projects, trade ties, loans, and in some instances, bribery. These relationships are not purely commercial; they’re tools of foreign policy. This is Chinese state capitalism, or as China scholar Jude Blanchette calls it, “CCP, Inc.” By dominating strategic sectors—ports, power grids, telecommunications—Chinese firms make countries reliant on Beijing for economic growth and essential services, which in turn further ensure the Chinese Communist Party’s long term stability. That dependence becomes leverage. If a government supports Taiwan, criticizes Chinese policies, or edges closer to the U.S., China can retaliate by canceling projects, restricting imports, delaying vaccine shipments, or suspending tourism.

The Caribbean

Nowhere in the hemisphere is China’s per-capita investment footprint more concentrated than in the Caribbean. Through a mix of concessional loans, tourism-focused developments, and high-visibility infrastructure projects, Beijing has embedded itself in the political economies of small island states. For many of these nations, Chinese capital fills critical development gaps left by traditional Western actors. Yet beneath the surface, these engagements function as strategic footholds—testing how commercial dependency can evolve into geopolitical leverage.

Guyana is illustrative. Chinese companies are increasingly engaged in the oil rich country, especially in energy and construction. In early 2021, Guyana announced it would allow Taiwan to open a small trade office in Georgetown. But within 24 hours, Guyana abruptly reversed course after China purportedly threatened to delay COVID-19 vaccine shipments or curtail investments in energy and infrastructure. Local Guyanese have also expressed dismay at the proliferation of Chinese supermarkets and retailers undercutting local businesses.

In the Bahamas, the $3.5 billion Baha Mar resort—financed by the China Export-Import Bank and built by China Construction America (CCA)—became the largest single-phase resort in the Caribbean. When the project went bankrupt, Chinese entities forced out the original developers and seized control through legal and financial maneuvering. A New York state court ruled that CCA induced the project’s financial collapse through fraud and misrepresentation.

In Jamaica, China Harbour Engineering Company (CHEC)—which was blacklisted by the U.S. Commerce Department for building artificial military islands in the South China Sea- constructed the North–South Highway and was later awarded contracts for port expansion and logistics hubs. While Jamaica maintains strong ties with the U.S., it consistently avoids antagonizing Beijing.

In Trinidad and Tobago, Chinese companies have become involved in the oil industry, built a $500 million drydock and a $102 million industrial park in La Brea, made significant investments in the telecommunications sector, and donated hundreds of police motorcycles and buses. This has caused concerns about over-reliance.

In Antigua and Barbuda, a Chinese SOE secured the rights to a large swath of land to build a deep water port and special economic zone with everything from logistics to cryptocurrencies. This raised concerns in Washington that China could potentially use this area for commercial and military purposes. The project’s opacity, combined with its proximity to major maritime routes, mirrors similar dual-use infrastructure strategies employed by Beijing in Africa and the Indo-Pacific. Such developments underscore how seemingly benign investments can serve as prepositioning platforms for influence projection, economic leverage, or even future People’s Liberation Army (PLA) logistical access in the hemisphere.

There are also more subtle tactics. Prominent members of the local Chinese diaspora community with direct ties to top political leaders help facilitate Chinese business projects in their respective countries. Some Caribbean countries have also received an influx of Chinese nationals acquiring citizenship by investment who then help expand Chinese business interests and try to persuade some governments to ditch Taiwan.

China is not just investing—it is rehearsing influence. The Caribbean provides a low-risk, high-return environment for the CCP to refine coercive economic tools. These engagements, when left unchecked, enable Beijing to shape elite behavior, compromise digital and physical infrastructure, and embed long-term dependencies under the guise of partnership.

Central America

Central America is a key battleground for China’s campaign to diplomatically isolate Taiwan. Since 2017, Panama, El Salvador, Nicaragua, and most recently Honduras have switched recognition to Beijing—each after receiving promises of investment, aid, or infrastructure.

In Honduras, the decision came in 2023 after officials openly compared what Taiwan and China could offer. Honduras reportedly asked Taiwan for $2 billion in development assistance, including a hospital and a hydroelectric dam, though the Honduran government denied this. When Taipei declined, Honduras quickly sealed a deal with Beijing. China rewarded the move with state visits and new cooperation agreements. Whether the promises will materialize remains to be seen—but the diplomatic result was already banked.

El Salvador followed a similar path in 2018, announcing its break with Taiwan. China quickly pledged a new stadium, library, and water treatment plants—while U.S. officials warned that the proposed La Unión port project could serve dual military purposes. El Salvador’s economy is now more entwined with Chinese capital—and its foreign policy more circumspect.

In Panama, China’s influence extends well beyond trade. After switching diplomatic recognition from Taiwan to China in 2017, Panama signed on to the Belt and Road Initiative (BRI) and welcomed a surge of Chinese business delegations. The Trump administration decried the fact that the Hong Kong-based company CK Hutchison Holdings operated two key port terminals on both sides of the Panama Canal. A U.S. company, BlackRock, has since sought to acquire the ports, although the deal is currently in legal limbo. Panama’s president Jose Raul Mulino also said Panama has withdrawn from the BRI, and the U.S. is helping Panama replace Huawei telecommunications equipment in 13 sites around the country. Mulino and subsequent Panamanian officials will now have to walk a careful line—placating U.S. national security concerns around the canal while not appearing as a U.S. puppet and continuing to welcome Chinese capital.

South America

In South America, China’s strategy hinges on dominating trade. Brazil, Chile, Peru, and Argentina all count China as their largest export destination. With stakes in copper, lithium, soy, and rare earths, China has embedded itself deeply in these economies.

But that trade relationship can become a political tool. In Brazil, when President Bolsonaro threatened to ban Huawei from 5G contracts, China delayed key vaccine ingredients. Shortly after Brazil softened its position, shipments resumed. Beijing never admitted a link—but Brazilian governors certainly noticed.

Brazil’s current president Lula da Silva has been much more cooperative with the Chinese, and Brazil is courting Chinese electric vehicle and tech companies to invest in the country.

However, there is an ongoing debate in Brazil about how a further increase in Chinese exports due to overcapacity of both high and low-end manufactured goods could exacerbate the de-industrialization of Brazil’s manufacturing sector; this is why Brazil has imposed anti-dumping tariffs on Chinese iron, steel, and fiber optic cables.

Elsewhere, Chinese firms have invested in ports, highways, and energy grids. In Peru, two Chinese companies have a virtual monopoly over Lima’s electrical grid. China is financing Peru’s Chancay megaport, which Chinese scholars of Latin America call one of China’s “strategic support points,” a term used by the PLA and military researchers denoting ports with both commercial and strategic purposes. In Argentina, Bolivia, Chile, and Venezuela, Chinese companies have built space research infrastructure that could also serve dual-use purposes; local governments can push back on these projects for only so long until they suffer economic retaliation. While many of these projects appear beneficial, they deepen structural dependence on Chinese capital—making future coercion easier and more effective.

Policy Recommendations

All these examples point to the need for local LAC leaders to take stock of the very real irregular tactics China uses to undermine their sovereignty. As such, LAC countries must reduce their economic over-reliance on China with the same fierceness they use to guard against U.S. or other big country interference. Fortunately, there are already playbooks Global South countries can use to further shore up their economic security. The following recommendations are intended for both LAC governments and their U.S. and international partners:

Recommendations for LAC countries:

1. Institutionalize awareness of CCP economic coercion. The Atlantic Council’s Chinese economic coercion report can act as a guide. It provides case studies and operational tactics to recognize early indicators of economic warfare. Regular public-sector training in ministries of trade, economy, and foreign affairs should include scenario-based simulations of coercive trade behavior, investment withdrawal threats, and digital authoritarian entrenchment.
2. Seek transparent, high-quality alternatives. Pursue the G7’s Partnership for Global Infrastructure and Investment (PGII), and Inter-American Development Bank-financed infrastructure that emphasizes governance, Environmental, Social, and Governance (ESG) standards, and local capacity building. Critically, demand conditionality transparency in all future foreign infrastructure contracts—especially those related to ports, fiber-optic cables, energy grids, telecommunications, space, artificial intelligence, and data centers.
3. Coordinate regional response mechanisms. Develop rapid-response economic teams to support countries facing Chinese retaliation—whether through trade substitution, diplomatic backing, or financial relief.
4. Strengthen investment screening. Review foreign investment deals for national security risks, similar to the Committee on Foreign Investment in the U.S. or Canada’s recent amendments to its foreign direct investment rules. This includes legal reforms to screen foreign direct investment in strategic sectors, empowering defense and intelligence ministries to contribute to risk assessments, and publicizing CCP-linked corporate acquisition trends for transparency.
5. Support export diversification. Reduce overreliance on Chinese demand by identifying new markets, building downstream industries (e.g., lithium battery tech, rare earth separation), investing in logistics modernization, and expanding trade facilitation efforts. Some partners like the European Union, Japan, South Korea, and India are also looking to expand economic partnerships with LAC. Market diversification through free trade agreements offers sustainable pathways to reduce coercion exposure.

Recommendations for U.S. and partner nations:

6. Expand and Reauthorize the U.S. International Development Finance Corporation. Congress should reauthorize the U.S International Development Finance Corporation and double its capital portfolio to $120 billion from $60 billion. The U.S. should not try to match China dollar-for-dollar, but it can match China in reliability. Under the FY25 National Defense Authorization Act, this should be coordinated with the Office of Strategic Capital and the proposed National Security Council Economic Statecraft Integration Cell, enabling the Development Finance Corporation to deliver targeted, secure infrastructure financing at scale.
7. Maintain persistent engagement. Diplomatic absence creates space for China and diplomatic consistency is as important as financial presence. Regular high-level visits, economic dialogues, and people-to-people exchanges can reaffirm U.S. commitment. Moreover, the U.S. should embed Economic Influence Monitoring Teams—comprising State, Treasury, DOD (SOUTHCOM), and Commerce officials—at embassies in vulnerable LAC countries. These teams would provide early warning of coercion attempts, vet infrastructure proposals for embedded risk, and coordinate direct reporting mechanisms.
8. Elevate Civil Society Capacity through Targeted Legal and Media Support. Fund regional investigative media hubs, legal watchdog networks, and civic tech platforms to expose hidden debt clauses, political financing flows from CCP-linked firms, and disinformation tied to foreign investment. The Global Magnitsky Act should be utilized to protect journalists and civil society actors at risk from transnational repression or corruption.

Strategic Action Framework: Countering CCP Economic Influence in LAC

Conclusion

China’s expanding economic engagement in Latin America and the Caribbean is reshaping the region’s strategic landscape. Beijing has positioned itself as an indispensable development partner—especially for those who perceive traditional Western actors as inconsistent, conditional, or disengaged.

Yet China could use the same levers of commercial cooperation to deploy irregular tactics to undermine LAC countries’ sovereignty, especially when those countries make decisions that go against China’s interests. Governments that cross Beijing—by recognizing Taiwan, criticizing its human rights record, or aligning more closely with Washington—risk subtle but tangible forms of retaliation: project cancellations, delayed trade, suspended medical shipments, or withdrawal of tourists and investors. This is irregular warfare by design—waged in boardrooms, tenders, and trade agreements. Subversion replaces confrontation; contracts replace conflict.

LAC governments must guard their sovereignty from China or risk seeing the Monroe Doctrine replaced by Sun Tzu Doctrine. The U.S. interagency—along with its allies and partners—must do more to provide alternatives to LAC countries to ensure the region experiences true unfettered freedom.

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