South America's Critical Minerals: The New Front in U.S.-China Competition

Beijing and Washington battle for influence over the world's most resource-rich region

South America has emerged as the decisive battleground in the global competition for critical minerals essential to clean energy and digital technologies. The region controls approximately 60% of identified lithium globally, with Bolivia possessing 21 million tons, Argentina 19.3 million tons, and Chile 9.6 million tons of the world's most critical battery metal. Chinese companies have invested over $16 billion in South American lithium projects between 2018 and 2024, while the United States scrambles to reassert influence through new partnerships and supply chain initiatives. Beyond minerals, the continent holds Venezuela's massive oil reserves, Guyana's booming offshore discoveries, and nearly a third of global renewable freshwater. This competition extends beyond economics to geopolitical realignment, with South American nations navigating between Chinese state capitalism and American partnership models while managing the political complexities of resource abundance.

Image: Bolivia’s Salar de Uyuni—famous for its vast salt flats—also contains the world’s largest lithium deposits, a critical resource for the global energy transition. Photo by Luca Galuzzi, licensed under CC BY-SA 2.5

The Strategic Context

The mineral geography of South America reads like an inventory of the future economy's most essential inputs. The lithium triangle spans Argentina, Bolivia, and Chile, containing 60% of global lithium reserves concentrated in an area comparable in size to California. Beyond lithium, the continent supplies crucial copper from Chile and Peru, rare earths from Brazil, and agricultural commodities that directly influence global food security and geopolitical leverage.

Global demand for lithium could increase by a factor of 40 over the next 15 years, with copper demand projected to soar by 40% over the next five years, outpacing current output by 2030. Electric vehicles require six times the mineral inputs of conventional cars, while a single wind turbine consumes two to three tons of copper. Without South American supply, the path to global decarbonization becomes economically and technically infeasible.

This concentration of critical resources recalls historical patterns where geography determined global power dynamics. Just as 19th-century Britain secured coal and oil access to dominate industrial development, today's powers compete for lithium and copper to anchor their digital and green economies. South America's geological inheritance places it at the center of this new great game.

China's Strategic Dominance

China has systematically established itself as Latin America's second-largest trading partner overall and the largest for South America specifically. In 2024, total trade between China and Latin America and the Caribbean reached $518 billion. This economic relationship extends far beyond commodity exchanges to encompass comprehensive industrial and financial integration.

Since 2017, 22 countries in Latin America and the Caribbean have formally joined China's Belt and Road Initiative. However, Chinese BRI engagement in Latin America has declined significantly, with the region receiving just 1.14% of construction engagement and 0.4% of investment in the first half of 2025. This reflects a strategic recalibration rather than retreat, as Beijing moves toward more targeted investments that deliver greater strategic value.

Critical Minerals Control and Vertical Integration

Chinese companies have systematically acquired lithium mining rights across Latin America. Chinese company Tianqi Lithium owns a 26% share in the Greenbushes mine and approximately 22% of Chile's SQM, a leading lithium chemical producer. By 2024, China controlled approximately 60% of global lithium processing capacity, 77% of battery cell manufacturing, and produced 56% of the world's electric vehicles.

This vertical integration strategy ensures Chinese control extends from mine to battery, creating structural dependencies that transcend simple market relationships. The strategy extends beyond extraction to processing capabilities, where approximately 65% of the world's lithium processing capacity concentrates in China, compared to Chile's 29% and Argentina's 5%.

Financial Leverage and State-Directed Investment

Since 2005, China's state-owned China Development Bank and Export-Import Bank of China have loaned more than $120 billion to Latin American and Caribbean countries. This state-directed financing approach contrasts sharply with market-driven American investment, enabling China to pursue strategic objectives that might not meet conventional commercial criteria.

The approach emphasizes patient capital and long-term relationship building. Chinese companies and financial institutions can absorb short-term losses to achieve strategic positioning, while American firms face quarterly earnings pressures and shareholder expectations that limit their ability to pursue similar strategies.

U.S. Strategic Response

For Washington, the picture represents both opportunity and strategic vulnerability. The Monroe Doctrine once implied uncontested U.S. influence in Latin America, but that era has definitively ended. American strategy now operates across interconnected tracks designed to rebuild influence while securing critical supply chains.

Supply Chain Security Architecture

The foundation of American strategy rests on comprehensive critical minerals policy. The U.S. Geological Survey's 2025 draft critical minerals list includes 54 minerals, adding copper, silicon, lithium, and zirconium to address economic and national security vulnerabilities. The Inflation Reduction Act's Section 30D New Clean Vehicle Credit established mineral sourcing requirements from the United States and countries with free trade agreements, mobilizing $114 billion in private-sector electric vehicle investments.

Legislative initiatives like the Critical Mineral Consistency Act of 2024 ensure critical mineral projects, including copper mines, qualify for streamlined permitting with two-year completion goals. However, current market conditions present challenges, with lithium, cobalt, and nickel prices at multi-year lows, deterring private investment in capital-intensive mining operations.

Domestic Production Limitations

American domestic mineral production remains limited. Currently, the only lithium production in the United States comes from Albemarle's Silver Peak brine facility in Nevada, though additional domestic production is expected this decade from projects in Nevada and North Carolina. The United States controls less than 1% of global uranium reserves, highlighting the strategic imperative for international partnerships with allies like Australia, Canada, and Namibia.

Diplomatic and Economic Engagement

As of 2024, Beijing has signed free trade agreements with Chile, Costa Rica, Ecuador, Nicaragua, and Peru, while the United States maintains fewer comprehensive trade relationships in the region. U.S. Secretary of State Antony Blinken described Argentina as an "exceptional investment opportunity," emphasizing lithium as a crucial sector for American investment.

The Biden administration launched initiatives including the Americas Partnership for Economic Prosperity and committed funding through the Partnership for Global Infrastructure and Investment. However, critics argued the administration didn't focus sufficiently on the region, particularly regarding comprehensive trade relationships.

Oil and Gold: Venezuela and Guyana

Venezuela still holds the world's largest proven oil reserves, alongside vast gold deposits. But years of mismanagement, corruption, and sanctions have gutted its economy. Washington faces a dilemma: maintain sanctions and push Caracas further toward Beijing and Moscow, or ease restrictions to stabilize oil flows at the cost of legitimizing Nicolás Maduro's authoritarian regime.

Meanwhile, Guyana has become the world's fastest-growing economy on the back of massive offshore oil discoveries. ExxonMobil leads extraction, but the country faces the classic "resource curse": sudden wealth distorting politics, fueling corruption, and widening inequality. Washington's challenge is twofold—secure reliable crude while helping preserve Guyana's fragile democracy.

The contrast between these neighboring countries illustrates the broader regional pattern: resource abundance doesn't guarantee prosperity without strong institutions and governance. Venezuela's collapse despite holding more oil than Saudi Arabia serves as a cautionary tale for other resource-rich nations contemplating their strategic partnerships.

China has positioned itself as Venezuela's economic lifeline, providing over $60 billion in loans since 2007 in exchange for guaranteed oil shipments. This relationship demonstrates Beijing's willingness to engage with pariah states when strategic resources are at stake, creating complications for U.S. sanctions policy and regional stability.

Water: The New Oil?

South America's rivers, aquifers, and glaciers account for nearly a third of global renewable freshwater. Brazil's Amazon basin alone is a planetary hydrological engine, influencing rainfall as far away as the U.S. Midwest and West Africa. In an era of climate stress, water may prove more strategic than oil.

Water also underpins agriculture and energy. From Argentina's soy exports to Peru's vineyards, and from Paraguay's Itaipú Dam to Chile's hydropower, it drives economies and global markets. For Washington, water security is no longer just an environmental issue but a strategic one: food supply, energy stability, and climate resilience are all at stake.

The Guaraní Aquifer system, spanning Argentina, Brazil, Paraguay, and Uruguay, contains enough freshwater to supply the region for 200 years. As water scarcity intensifies globally, control over such resources becomes increasingly geopolitical. China's infrastructure investments often include water management projects, creating potential leverage over this critical resource.

Climate change adds urgency to water competition. Andean glaciers that feed major rivers are retreating rapidly, while changing precipitation patterns threaten agricultural regions. The countries that manage water resources most effectively will gain significant advantages in food production and hydroelectric generation.

Strategic Options & Constraints

Chile: Resource Sovereignty and State Control

Chile announced plans in April 2023 for increased state control over its lithium industry, directly affecting SQM and Albemarle's operations. SQM's contract expires in 2030 while Albemarle's extends until 2043. SQM entered into a partnership agreement with state-owned Codelco, through which Codelco will own the majority of the joint venture.

This move reflects growing resource nationalism and determination to capture greater value from mineral wealth. Chile's strategy does not fully nationalize lithium production but highlights a shift toward stronger public-private partnerships, with the state holding a majority stake in forthcoming lithium projects.

Chile's approach balances maintaining foreign investment and expertise while asserting sovereign control over strategic resources. The country has successfully transformed the majority of its lithium resources into economically viable reserves, providing a foundation for more assertive resource policies.

Argentina: Investment Attraction and Production Expansion

Argentina provides the most promising case for rapid lithium industry expansion, with government projections suggesting production could nearly double from 44,000 metric tons in 2023 to 81,000 metric tons in 2024, with possible expansion of nearly five times by 2028. Argentina could potentially displace Chile as the second-largest lithium producer by 2027.

In February 2025, Chinese battery giant CATL signed a landmark agreement with Argentina's YPF to develop the Salar del Hombre Muerto deposit, investing $1.4 billion to produce 30,000 tons of lithium annually by 2028. This partnership exemplifies China's state-backed strategy, combining technological expertise with financial resources to secure priority access to critical minerals.

Argentina's strategy reflects both recognition of collective bargaining power and practical development needs that require foreign partnership and investment. The country operates two commercially operational salt flats in Jujuy and Catamarca provinces, with many additional lithium extraction sites under construction since 2019.

Brazil: Strategic Autonomy

Brazil exemplifies the careful balancing act between major powers. Brazil declined to formally join China's BRI while agreeing to "establish synergies" with the initiative. President Lula's administration prioritizes "strategic autonomy" and demands substantial trade access rather than signing away leverage through premature commitments.

Brazil, which holds the world's third-largest global reserves of nickel and rare-earth elements, has devoted $815 million to bolstering projects in the field. The country's approach reflects its position as Latin America's largest economy and most influential regional power, seeking project-based collaboration without formal BRI membership.

This calculated approach allows Brazil to press for terms that strengthen its economic position. Endorsing the BRI without securing concessions would weaken Brazil's leverage in negotiations with both China and the United States.

Regional Realignment & Alliances

China-Latin America relations have "entered a period of optimal strategic opportunity," as Latin America experiences another "pink wave" with left-wing governments surging back to power. However, geopolitical pressures are intensifying. Panama has become the first Latin American country to exit the BRI, under pressure from the new Trump administration.

The competition between Washington and Beijing extends beyond bilateral relationships to encompass the formation of new multilateral frameworks. The US and Japan signed the Critical Minerals Agreement in 2023, which limits export duties on EV batteries and promotes recycling and sustainable practices while encouraging policy cooperation.

Environmental and Social Concerns

Environmental concerns are mounting, with local communities reporting wells drying up and agricultural yields plummeting near Chinese lithium operations. "The Chinese companies come with promises of prosperity, but what we see is our water disappearing," explains a community leader from San Pedro de Atacama, where nearly half the population now lacks reliable water access.

These social and environmental costs create political vulnerabilities for governments that have embraced Chinese investment without adequate safeguards. The sustainability of extraction practices will increasingly influence public opinion and electoral outcomes across the region.

The water-intensive nature of lithium extraction creates particular tensions in arid regions like the Atacama Desert, where competing demands from mining, agriculture, and local communities generate conflicts that can destabilize investment climates and political relationships.

Measuring Strategic Success

Success in this competition will be measured by multiple metrics: diversified supply chains that reduce single-source dependencies, technological integration that moves beyond raw material extraction, and regional development that transforms geological endowments into sovereign strategic assets.

The region's governments increasingly recognize their leverage and seek to avoid becoming mere commodity suppliers to either power. Success will require moving beyond the traditional extraction model toward value-added processing, technological integration, and regional coordination.

The ultimate measure will be whether South American nations can avoid the resource curse and achieve inclusive prosperity while maintaining sovereignty over their strategic assets. This requires building domestic capabilities in processing and manufacturing, not just extraction.

Water management will become an equally important measure of success, as countries that effectively balance extraction needs with environmental sustainability and social equity will maintain more stable investment climates and political systems.

Our Take: China's two-decade head start has created structural advantages that American policy cannot quickly overcome, but the shift toward environmental standards and supply chain resilience creates openings for renewed U.S. engagement. South American governments increasingly recognize their leverage and seek genuine partnership rather than commodity supplier status. The winner will be whichever power helps these nations build diversified, technologically advanced economies instead of perpetuating extraction-only relationships. Water and environmental sustainability will prove as strategically important as mineral access, as countries that neglect these dimensions risk political instability that undermines long-term resource security.