The Missing Pillar of U.S. Strategy: Forging a New Energy Partnership for the Americas

EXECUTIVE SUMMARY

The United States’ future technology leadership depends on reliable energy, defense, and industrial supply lines and the capacity to reliably meet the domestic power demands of the artificial intelligence (AI) era. Fueling the domestic AI boom will require connecting fifty gigawatts of dedicated capacity by 2030—an addition exceeding New York State’s total grid capacity. The sheer volume of critical minerals, specialized manufacturing, and clean energy required to maintain a U.S. technological edge vastly outstrips domestic capacity.

The Americas hold the potential resources and capacity to meet those needs and will shape whether global AI and digital innovation are built on U.S. or Chinese foundations. Yet to harness that potential, the United States should look beyond the defensive priorities that define its engagement in Latin America today. It needs a modernized approach to transform the Western Hemisphere from a buffer into an engine of mutual security and prosperity.

U.S. strategy for the region should be organized around three key pillars:

Through an approach built around concrete, bankable deals that generate commercial value and high-value jobs for the United States and its regional partners—and constructing the institutional architecture necessary to execute them—this strategy would generate a multi-decade commercial motor to propel industrialization, innovation, and mutual prosperity. Such an approach, based on shared economic interests, could repair the trust lost between the United States and the rest of the region, and withstand shifting political cycles across the Americas.

Future U.S. technology leadership rests on the country’s ability to secure massive electric power, physical copper, and supply chains built for a less predictable world, as well as the ability to offer a commercial economic partnership that can compete with Chinese investment and technology. Investment in integrated, resilient supply chains within the Western Hemisphere can be the foundation for American strength and shared regional prosperity well into the future.

INTRODUCTION

The United States faces two simultaneous and high-consequence disruptions: the growing weaponization of global trade and the domestic energy demands of the artificial intelligence (AI) boom. At home, the digital economy is colliding with the physical limits of the electric grid. In Northern Virginia alone, data centers consume over five gigawatts of power—a demand forecast to double by 2030. In July 2026, a disaster was narrowly averted when four thousand megawatts of data center load tripped offline, narrowly averting a cascading regional blackout. Without fast response grid flexibility, expanding power generation, and new international partners to share the load, U.S. technological leadership could stall.

Abroad, countries are weaponizing energy, defense, and industrial supply lines through geographic and commercial chokeholds. Iranian global economic leverage has been enhanced through Iran’s control of traffic through the Strait of Hormuz. Meanwhile, China’s near-monopoly over the processing of lithium and rare earths creates a chokepoint as dangerous as control of any maritime strait. These chokeholds can only be loosened by diversifying supply.

For the United States, this means treating energy, critical minerals, and the supply chains in which they are embedded as the central pillar of a hemispheric strategy. For more than eighty years, U.S. strategy in the Middle East was organized around securing energy supplies and stabilizing global markets. In the Americas today, U.S. engagement has narrowed to migration, counternarcotics, and trade enforcement—defensive priorities that do not capture a vision of shared prosperity. (To be sure, the North American Free Trade Agreement and the United States-Mexico-Canada Agreement established deep industrial integration but face continued debate over their effect on American workers.) Energy, minerals, and the supply chains that deliver them can provide a multi-decade commercial motor to propel industrialization, innovation, and mutual prosperity—and withstand shifting political cycles across the Americas.

This approach should be built around a strategic modernization framework, which can rebuild U.S. trust and influence in the hemisphere. The Western Hemisphere should be envisioned as an integrated whole, through which energy, critical minerals, and AI technology pass via interconnected supply chains. Due to the national security importance of securing reliable access to energy, critical minerals, and technology, countries would prioritize this commercial approach even through political volatility, administrative transitions, and regional populist swings. The best way to accomplish this goal, and to rebuild trust in U.S. policy, is through concrete, bankable deals that generate commercial value and high-value jobs for the United States and its regional partners.

THE STRATEGIC CONTEXT: SECURING SUPPLY CHAINS WHILE MEETING AI-DRIVEN ENERGY NEEDS

The global order is undergoing profound restructuring as traditional mechanisms of governance and economic integration fracture. The United States and China are locked in a race to shape global commerce and geopolitics. The 2025 U.S. National Security Strategy designated the Western Hemisphere a vital line of defense. Yet transforming the region from a buffer into an engine of mutual security and prosperity hinges on whether the Americas can turn three disruptive vectors into opportunities:

Loosening Chokepoints

Chokepoints affect both maritime transit and mineral processing. In the first six months of the war with Iran, weaponization of the Strait of Hormuz disrupted the transportation of ten to fifteen million barrels per day of crude and refined products. It also severed roughly one-third of global fertilizer supply, according to analysis from the International Fertilizer Association, triggering agricultural shocks that will be felt into 2027.

China processes close to 90 percent of global rare-earth elements, cobalt, and graphite and more than 70 percent of refined lithium, and imports 66 percent of seaborne copper ore for domestic smelting. Rare earths power high-efficiency motors. Graphite, lithium, and cobalt make batteries function. Copper is the conduit for electricity. All those resources are needed to build vehicles, turbines, precision-guided missiles, and stealth aircraft. Today, as the UN Economic Commission for Latin America and the Caribbean notes, China is the primary trading partner for most of South America. In Brazil alone, Chinese companies have purchased Ford’s former operations, General Electric’s wind turbine plant, and major electric distribution platforms. Chinese firms now own these businesses’ supply chains and their long-term relationships.

Securing Energy

Meanwhile, electrification is accelerating. Annual investment in electrification technologies, including grids, storage, and electric mobility, is expected to reach $1.4 trillion this year and nearly $2.8 trillion by 2030. Latin America could benefit from this transition, with nearly 60 percent of its electricity generated from renewable sources, making it one of the cleanest power systems in the world. Yet the region continues to attract a disproportionately small share of global energy investment. Financing costs remain a barrier, with the weighted average costs of capital typically ranging from 12 percent to 15 percent, roughly three times the levels of advanced economies. As a result, more than 85 percent of global power-sector investment remains concentrated in the United States, China, and Europe.

Compounding this imbalance, fossil fuels still supply nearly 80 percent of global primary energy. Because global consumption has doubled since 1990, the world consumes nearly twice the absolute volume of fossil fuels today. If energy is to be sustainable and reliable, asset-level decarbonization will have to be paired with robust hydrocarbon development. Resources in the Western Hemisphere—including Argentina’s Vaca Muerta, Brazil’s pre-salt, and Guyana’s offshore basin—provide essential, flexible volumes to buffer international markets against geopolitical disruption.

The Race for Power

The digital economy is testing the limits of U.S. power grids. According to S&P Global, fueling the domestic AI boom will require connecting fifty gigawatts of dedicated capacity by 2030—an addition exceeding New York State’s total grid capacity [PDF]. Constructing those assets will demand $75 billion in cumulative capital by 2030, on top of the $200 billion U.S. utilities deploy annually to keep the U.S. power system running. Because families, small businesses and industries pay for electricity in their utility service areas, they shoulder the electricity cost of the AI and data center boom. Price increases, as well as land use, noise, and other concerns, have caused hundreds of municipalities across red and blue states to pass zoning laws to pause data center development.

Those AI workloads that do not depend on physical proximity can move abroad, thereby offering some relief. Argentina, Brazil, and Chile’s access to renewables and natural gas, as well as Mexico’s cross-border power corridors, make them suited to hosting digital infrastructure that can ease pressure on the U.S. grid. In return, U.S. AI tools could be deployed across Latin America to transform regional supply chains.

AMERICAN INTERESTS AND OBJECTIVES

The United States has two broad objectives in Canada and Latin America: securing the energy to drive U.S. innovation through AI and emerging technologies, and mitigating the risks from concentrated supply chains. The United States, strategically partnered with Canada and Latin America, can catalyze the region’s industrial base and build secure, competitive supply chains. Four U.S. interests are paramount.

First is the need to power the U.S. innovation economy. The Americas will determine whether global AI and digital innovation are built on U.S. or Chinese foundations. Copper underscores this vulnerability: although China’s domestic demand is three times that of the United States, its processing capacity is nearly tenfold. This leaves the United States exposed to trade disruption, as a global copper deficit is likely to be felt by 2040. Therefore, securing critical minerals through hemispheric partnerships is essential to sustaining U.S. technological and energy leadership. Tying mineral extraction to regional midstream processing—such as rare-earth magnet development in Brazil or battery manufacturing in Mexico—safeguards critical U.S. supply chains while driving industrialization across Latin America.

Second, Washington needs to diversify and create supply chain resilience. The Western Hemisphere provides a large-scale, credible counterweight to China and the Middle East. Expanding hydrocarbon output across the United States, Argentina, Brazil, Canada, and Guyana would establish a strategic buffer, as well as alternatives, for regional and global consumers. Empowering Latin America to develop its midstream mineral processing capacity can yield secure, geopolitically insulated inputs for the U.S. defense, automotive, and technology sectors.

Third, integrating those hemispheric resources into a competitive economic bloc would reinforce U.S. industrial capacity. The United States sources 50 to 70 percent of its intermediate goods for electrical equipment, grid infrastructure, and electronics from Asia. Excluding Mexico, just 4 to 5 percent of U.S. intermediate inputs come from Central and South America. Scaling the manufacturing of transformers, high-voltage direct current cables, and grid-scale batteries across Brazil, Colombia, and Mexico could break bottlenecks in U.S. grid expansion, establish stable export markets for U.S. technologies, and increase regional growth that alleviates migration pressures.

Fourth, in the global competition for energy, the cheapest, most reliable, and lowest-carbon energy mix will eventually prevail. For this energy to be reliable and competitive, it will require a wide resource base and constant technology upgrades, including the capture of methane and carbon. A decarbonization strategy that is not commercially competitive will ultimately fail the test of energy security and lose public support. Mobilizing capital to produce lower-carbon-intensity oil and gas, and to make power systems cleaner and more reliable, will help ensure stable domestic prices.

A NEW APPROACH: A NEW ENERGY PARTNERSHIP FOR THE AMERICAS

Advancing these interests requires a new, pragmatic, strategic modernization framework. This should be a hard-nosed, commercially driven policy centered on shared economic interests, bankable transactions, and the institutional architecture necessary to execute them. Strategic modernization is centered on deals that advance crucial, strategic interests. In a hemisphere characterized by ideological shifts and populist swings, durable trust can only be forged through commercially resilient projects that outlast political cycles. In a fractured global order, concrete cross-border deals will offer far greater durability than broad political declarations. The strategy should be built around three core pillars and implemented through highly targeted projects and deals designed to be piloted, tested, and scaled, as well as specific implementation mechanisms.

Reinforce U.S. Technology Leadership

U.S. national security strategists have now firmly embraced the race to outpace China in semiconductor compute and AI deployment—a bipartisan consensus ensuring they will endure across political transitions. The Western Hemisphere is central to that competition, including its capacity to host the energy-intensive digital infrastructure that the U.S. domestic grid struggles to support. Further, as nations are forced to decide between U.S. and Chinese technological architectures and regulatory standards, the choices the Western Hemisphere makes could determine the future of U.S. leadership in the global AI race. By extending its innovation ecosystem throughout the Americas, the United States can secure low-cost clean power while anchoring an enduring market for American technology.

The United States should advance this aim through concrete deals that harness the hemisphere’s energy potential to fuel AI workloads, easing the strain on U.S. utilities. For example, in 2024, Microsoft committed $2.7 billion to expand its hyperscale cloud and AI data center footprint across the Brazilian state of São Paulo. As announced in a September 2024 Microsoft press release, it underpinned its operations with long-term clean energy contracts, including a fifteen-year wind power agreement with AES Brasil. In parallel, wholesale digital infrastructure developers are building mega-campuses to host international hyperscalers. In southern Brazil, Scala Data Centers has broken ground on Scala AI City—a high-density AI-ready campus with approved grid access for up to 4.75 gigawatts of clean power. These investments demonstrate how Brazil’s abundant renewable grid can absorb energy-intensive AI workloads, thereby easing constrained U.S. utilities.

The United States and regional partners could bilaterally negotiate cross-border “innovation sandboxes” (legally ring-fenced commercial zones) to de-risk and accelerate advanced technology deployment. That concept adapts the proven model of “regulatory sandboxes,” pioneered in 2016 by the UK Financial Conduct Authority and subsequently scaled globally by the World Bank and the Organization for Economic Cooperation and Development. Each sandbox tests a novel business model using regulatory waivers with direct supervisory oversight.

Applying the sandbox logic to physical and digital infrastructure, technology providers and regional utilities in the Americas could test capital-intensive systems such as high-density AI data centers in an expedited, protected regulatory environment. Host governments would fast-track permitting, guarantee intellectual property protections, and exempt import tariffs for specialized equipment. In exchange, the host nation would secure local cloud computing capacity and technology transfers that can accelerate its own innovation and industrialization.

Create Resilient Supply Chains

Latin America has the potential to help the United States manage the unpredictability that comes from an increasingly fractured global order. To reduce concentrated supply chain dependencies, the United States will need to distribute manufacturing networks across trusted partners. To do so, it will need to convert regional resource wealth and industrial potential into bankable, commercially viable transactions.

Guyana, for example, has demonstrated how private capital and agile governance can transform a frontier basin into a major producer, helping to diversify global energy supplies. Lacking a state oil company, domestic capital, and deepwater expertise, Guyana established competitive fiscal and regulatory terms to partner with an ExxonMobil-led consortium. From the landmark Liza discovery in 2015, the consortium achieved first oil in December 2019, cutting the conventional deepwater development timeline in half. Production exceeds 900,000 barrels per day (b/d) and is on track to surpass 1.7 million b/d by 2030. In 2026, the Americas will outproduce all core Middle Eastern members of the Organization of the Petroleum Exporting Countries combined and generate more than three times the total liquids output of Russia.

Another example illustrates similar transformative power in the minerals sector. Chile and Peru produce nearly 40 percent of the world’s mined copper, yet over 65 percent of their unrefined concentrates are shipped to China for smelting and refining. Latin American producers cannot compete with Chinese smelters, which operate the most modern facilities in the world, benefit from a legacy of subsidized power, and have driven processing fees to historic lows that box out competitors. Although copper is essential for electrification, independent smelting today is a loss-making commercial operation. Changing this dynamic requires hemispheric partners to invest in the processing supply chain. A bankable mechanism would pair long-term offtake agreements—spreading commercial price risk across end users such as hyperscalers, electric utilities, and manufacturers—with public development finance guarantees (such as from the U.S. International Development Finance Corporation [DFC] and the Export-Import Bank [EXIM]).

The manufacturing sector has similar potential to be transformed by investment. The United States currently imports the vast majority of its large power transformers, facing delivery lead times that have stretched from one year before the pandemic to as long as four years, stalling data center hookups and grid modernization. Even with high tariffs, producers find it cheaper to source turbine parts and transformers from Southeast Asian hubs including Vietnam, which often use Chinese components. U.S. manufacturers can break this impasse by building a competitive hemispheric manufacturing corridor linking Argentina, Brazil, and Mexico. U.S. industrial leaders can pair American advanced design, high-voltage testing, and capital through joint ventures with partners, including Mexico’s Prolec GE and Brazil’s WEG. Sourcing regional steel and copper through those cross-border partnerships would allow U.S. firms to compress equipment delivery times, lower utility costs, and secure supply chains within the Americas.

Mobilizing private capital to invest in regional supply chains requires reshaping U.S. investment and trade tools. A new global critical minerals investment facility (CMIF) could play an important role by transitioning bilateral mineral accords into a standardized, deal-focused commercial architecture. A CMIF would build directly on Project VaultCo—EXIM’s $12 billion strategic reserve and sixty-day domestic stockpile, launched in February. With a corporate offtake contract in place, the DFC would deploy equity and loan guarantees to co-fund allied processing in countries including Chile and Peru. The U.S. government could offer accelerated capital depreciation and targeted tariff exemptions for U.S. buyers. This is a win-win: Latin American hosts capture industrial value and jobs, while U.S. manufacturers secure cost-competitive, insulated inputs for the grid and AI revolution.

Optimizing the Energy Mix

For the United States to secure reliable and affordable energy through electrification and hydrocarbons, it will need to find ways to lower delivery costs, remove physical transit risks, and accelerate decarbonization. Through cross-border connections, U.S. natural gas abundance could be combined with Latin American renewable resources, transforming the Americas into an interconnected energy system that can work to power industrialization.

One benefit of cross-border energy infrastructure is the gas pipelines that stretch from the U.S. Permian Basin to Pacific liquefaction terminals in Mexico, connecting North American gas abundance directly to Asian demand centers. This Pacific corridor is anchored by Sempra Infrastructure’s Energía Costa Azul liquefied natural gas facility in Baja California, Mexico—the first operational export terminal on Mexico’s Pacific coast, which may pave the way for a pipeline of multibillion-dollar projects. Shipping North American natural gas from Mexico’s Pacific coast bypasses seasonal transit bottlenecks through the Panama Canal. It cuts maritime sailing times and freight costs to Asian markets by more than half compared to U.S. Gulf Coast routes. It also provides Asian allies—acutely vulnerable to Middle Eastern supply shocks—with an essential alternative to the Strait of Hormuz.

Another example is Sempra Infrastructure’s Energía Sierra Juárez wind complex in Baja California, which captures world-class regional wind resources and exports 100 percent of its zero-emission electricity directly into San Diego via a dedicated high-voltage link. This cross-border model matches Mexico’s electricity generation with U.S. capital and creditworthy off-takers to fund the physical grid connection. In return, Southern California utilities secure low-cost, zero-carbon power to stabilize their regional grid, establishing a scalable commercial blueprint for how North American capital can incentivize Latin American renewable generation.

Large-scale cross-border energy infrastructure—from transnational natural gas pipelines to high-voltage transmission lines—may clear technical and permitting hurdles only to stall at the financing stage due to revenue uncertainty, currency risk, and prohibitive borrowing costs. A sovereign-backed long-term offtake facility could unlock commercial debt and private equity through loans, political risk insurance, and sovereign guarantees from agencies including EXIM and the DFC. The facility would backstop multi-decade, dollar-denominated power purchase agreements and firm gas-transport contracts. Moving beyond one-off, project-by-project deals to institutionalize this facility at scale demands a broader multilateral framework.

CONSTRAINTS AND RESOURCES

From Strategy to Execution

U.S. statecraft is outmatched by China’s centrally directed financial firepower. While China has deployed over $1 trillion through its Belt and Road Initiative, U.S. development finance remains fragmented. Even with Congress raising the DFC’s cap to $205 billion, U.S. public funds cannot match Chinese state lending. To compete, Washington needs to deploy its ultimate advantage: the unmatched depth of Western institutional capital markets.

To expand these Western capital markets farther into the hemisphere and create a common point of access and better integration of U.S. and regional lending tools, the United States should champion a hemispheric infrastructure accord (HIA). A premier multilateral lender with members across the region—such as IDB Invest—could pool existing private-lending arms, including DFC, EXIM, FinDev Canada, the International Finance Corporation, the Multilateral Investment Guarantee Agency, the Brazilian Development Bank, and Mexico’s Banobras. Together, those entities command an active committed portfolio exceeding $50 billion in Latin American private sector and infrastructure projects, according to 2024 annual reports from the International Finance Corporation and the DFC. Using blended-finance risk mitigation, the HIA would target a one-to-four leverage ratio to mobilize up to $200 billion in private commercial and institutional capital. It could also manage a shared foreign exchange risk platform. When infrastructure revenues are earned in local currencies while debt obligations remain in dollars, investors face currency risks. The HIA would offer a unified suite of risk-mitigation tools, including local-currency lending, convertibility protection, and long-dated hedging facilities.

Some of the most persistent barriers to private energy investment across the Americas are project bankability and access to commercial capital. By providing a common point of access and better integration of the region’s lending tools, the HIA could tackle those challenges and unlock investment and growth.

Hemispheric Constraints

Though important, strategic modernization requires more than just capital. Even with a well-capitalized HIA, the initiative will collide with deeply entrenched political, structural, bureaucratic, and diplomatic realities across the Americas. Overcoming those barriers requires blunt acknowledgment of great power competition and a sustained, high-level diplomatic effort to align the hemisphere.

U.S. voters remain resistant to channeling resources abroad. Many policymakers have argued that diversifying supply chains and integrating with foreign countries reduces domestic investment and undermines U.S. reindustrialization. But those arguments do not change the reality that operating alone is a mathematical impossibility. The sheer volume of critical minerals, specialized manufacturing, and clean energy required to maintain a U.S. technological edge vastly outstrips domestic capacity.

If there is skepticism in the United States, there is also doubt in Canada and Latin America. Those countries are dubious about U.S. staying power, often regarding Washington as distracted by competing global crises and willing to use tariffs to get its own way. American dominance leaves hemispheric partners wondering how genuine partnerships are possible. A focus on concrete, structured deals can dispel those doubts. The HIA will play a vital role in unleashing capital and widening bottlenecks.

CONCLUSION: A STRATEGY FOR AN UNSTABLE WORLD

U.S. policy toward the Western Hemisphere cannot remain confined to a defensive agenda centered on migration and counternarcotics. Nor can it succeed solely through asserting dominance. True resilience requires genuine partnerships. The strategic modernization framework is tailored to this competitive era. The domestic stakes are pressing. AI development demands massive electric power, copper, and resilient supply chains. If the United States cannot anchor these essential assets in the Americas, innovation risks hitting a physical wall of power volatility and price spikes, and Latin America could well default to Chinese-engineered digital and physical grids. Integrated, resilient supply chains within the Western Hemisphere are the pragmatic, indispensable foundation for American strength and shared regional prosperity.

“The views expressed here are solely those of the author and not those of S&P Global or the Council on Foreign Relations. CFR is an independent, nonpartisan membership organization, think tank, and publisher, and takes no institutional positions on matters of policy.“