Explaining and Predicting: The Americas Act, U.S.-Latin America Trade, and Countering China

This explainer examines regional incentives, reactions, and beneficiaries of this landmark effort to reinvigorate hemispheric trade.


Image Source: U.S. Chamber of Commerce.

Amid growing Chinese influence in Latin America, the Peruvian government’s recent decision to grant China’s Cosco Shipping exclusive control over the $3.5 billion Chancay port—a key node in the Belt and Road Initiative—has set off alarm bells in Washington. Dubbed “the gateway between South America and Asia,” analysts believe the port is poised to become “South America’s first true global commercial hub.” 

In response to China’s growing sway in the hemisphere, U.S. legislators have proposed the Americas Act, a bold bipartisan effort aimed at countering China by boosting U.S. trade and investment in the region. Sponsored by Representatives María Elvira Salazar (R-FL) and Adriano Espaillat (D-NY) and U.S. Senators Bill Cassidy, M.D. (R-LA) and Michael Bennet (D-CO), this bipartisan bill offers incentives to increase hemispheric trade and opens a path for Latin American countries to join the USMCA free trade agreement. While our prior explainer explored the bill’s support in the U.S. and legislature, this explainer examines regional incentives, reactions, and beneficiaries of this landmark effort to reinvigorate hemispheric trade.

How does the Americas Act incentivize U.S. companies to reshore or nearshore their operations? 

The Americas Act establishes the Americas Partnership, which aligns economic and social interests in the Western Hemisphere. This partnership is organized into three pillars: trade, investment, and people-to-people connections. The Act includes significant support for nearshoring, such as creating a “Build Americas Unit” within the Development Finance Corporation (DFC) and increasing its borrowing authority from $60 billion to $90 billion. This expansion removes restrictions on DFC activities in upper-middle-income countries in the Western Hemisphere, facilitating private sector investments in nearshoring initiatives. Additionally, the U.S. Export-Import Bank’s loan, guarantee, and insurance authority would increase from $135 billion to $175 billion, benefiting U.S. businesses looking to expand their export portfolios within the hemisphere.

The Act also provides up to $60 billion in loans and grants and a $10 billion tax credit system to support businesses relocating operations. These incentives aim to counter China’s global manufacturing dominance and strengthen supply chains within the Americas. Interest gained from interest-bearing loans and tariff revenue from ‘de minimis’ reciprocity would be deposited into reshoring and nearshoring accounts, ensuring reliable supply chains for American companies without relying on taxpayer funding. Businesses must move at least two-thirds of their operations away from China to an Americas Partnership country or the U.S. to be eligible for these incentives.

The Act supports regional supply chains, particularly in textiles, apparel, and energy sectors. It establishes a $105 million annual grant program for manufacturers to improve infrastructure, equipment, and expand operations within the hemisphere. Provisions to improve regional security independence and channel renewable energy investments benefit manufacturers by providing reliable, clean, and cost-effective energy sources. The Americas Act provides foundational incentives to relocate manufacturing operations from China to the Western Hemisphere, ensuring supply chain resilience.

What are the regional perceptions of the Americas Act, and how do they differ between left-leaning and right-leaning governments?

The Americas Act has garnered bipartisan U.S. support, appealing to Latin American leaders across the political spectrum. Right-leaning governments, such as Costa Rica and Uruguay, view the Act favorably, seeing it as an opportunity to strengthen trade ties with the U.S. and potentially join the USMCA. Costa Rican President Rodrigo Chaves and Trade Minister Manuel Tovar have expressed gratitude for the opportunity, with Tovar arguing that “Costa Rica would be a great addition to the USMCA.” Uruguayan President Luis Lacalle has described the Americas Act as nearly akin to a free trade agreement in terms of benefits offered.

Many Latin American leaders who have felt the absence of U.S. investment and attention in the region now welcome an alternative to Chinese influence. Ambassadors from Colombia, Costa Rica, Ecuador, Guatemala, Panama, Peru, the Dominican Republic, and Uruguay have shown support for the Americas Act. They appreciate the potential to increase access to nearshoring and investment, and to reinvigorate regional trade.

However, while expanding the USMCA appeals to many Latin American nations, Mexico may be less enthusiastic. Mexico already benefits from an integrated economy and trade privileges with the U.S. and Canada. Mexican President-elect Claudia Sheinbaum may consider the downside of increased competition as Mexico tries to attract nearshoring and balance U.S. trade with growing Chinese influence.

On the other hand, left-leaning governments like Brazil’s might be more cautious due to closer ties with China and the Global South. Brazilian President Luiz Inácio Lula da Silva has focused on cozying up to alternative country groupings and may not want to commit to binding trade partnerships with the U.S. However, Argentina, under President Javier Milei, is likely to be more receptive. Milei has stated his goal of moving the country closer to the U.S. and attracting increased foreign investment through economic reforms. Despite differing political ideologies, the Act’s potential for economic growth and stability resonates with many leaders across the region, making it broadly appealing.

Which countries are best positioned to benefit from the Americas Act’s trade provisions, considering their infrastructure, export profiles, and governance?  

The Americas Act represents a strategic pivot in U.S. trade policy, aiming to realign economic and social interests throughout the Western Hemisphere. The Act provides substantial financial incentives and support mechanisms to counteract the current lack of appetite for traditional trade deals. The region would benefit, but the countries best positioned to take full advantage of these trade provisions are those with robust infrastructure, competitive export profiles, and stable governance. Key contenders include Mexico, Colombia, Chile, and Argentina.

Mexico stands out as perhaps the most important country for the U.S. to invest in due to its proximity and well-developed infrastructure, including highways, railways, and ports crucial for efficient trade. Additionally, Mexico has a diversified export profile, with strong sectors in automotive, electronics, and textiles, well-aligned with the Americas Act’s emphasis on textiles and apparel. Mexico’s established trade agreements, particularly the USMCA, provide a stable trade environment. The Americas Act offers Mexico expanded nearshoring incentives, increased financial support, greater regional integration, and a focus on renewable energy. By attracting more investments and strengthening supply chains, Mexico stands to gain significantly in terms of industrial growth, job creation, and sustainable development.

Colombia has significantly improved its infrastructure, enhancing transportation and logistics, with a strategic location providing access to both the Pacific and Atlantic Oceans. With a diversified economy in textiles, apparel, and energy, and a growing manufacturing sector, Colombia is well-positioned to benefit from nearshoring incentives. Chile boasts a highly developed infrastructure, including advanced telecommunications, modern highways, and efficient ports. Its strong export economy, stable political environment, and commitment to regulatory efficiency make Chile attractive for foreign investment. Argentina, rich in natural resources and with a significant industrial base, has extensive infrastructure, including major ports, railways, and highways. With a diverse export profile in agriculture, automotive, and energy sectors, and recent economic reforms to attract foreign investment, Argentina is well-suited to benefit from the Americas Act.

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