At the Fourth China-CELAC Forum Ministerial Meeting in May 2025, President Xi Jinping pledged 66 billion yuan in credit lines to Latin American and Caribbean countries, along with a fresh set of infrastructure investments. At previous CELAC summits, comparable Chinese commitments typically took the form of dollars. But this time, Beijing explicitly offered renminbi (RMB).
Earlier this year, a Communist Party-affiliated journal cited a remark Xi made in 2024, calling for the RMB to become “ a powerful currency widely used in international trade, investment, and foreign exchange markets.” The timing of the publication was not subtle given that the dollar had just hit a three-year low against a stronger yuan.
The conventional Washington reading of the scene is that Beijing wants to challenge dollar dominance in its backyard, and that the United States must respond with countermeasures. However, this way of thinking has it backwards. Yuan internationalization in Latin America is not primarily a Chinese accomplishment. It is a Washington-created opening that Beijing sees as an opportunity to exploit.
And the principal architect of that opening is the same Washington establishment now alarmed by the result. The Washington-Made Opening The dollar’s privileged role as the world’s reserve currency in the global economy rests on the U.S. government’s credibility and predictability as well as its adherence to the rule of law. Countries hold dollars and invoice trade in dollars because they trust that access will not be revoked for political reasons, that U.S. policy will not lurch unpredictably, and that the Federal Reserve will remain independent regardless of political pressure. Nevertheless, recent U.S. policy has deliberately weakened every one of those foundations.
The most consequential erosion of the dollar’s global status is sanction overuse. The Office of Foreign Assets Control’s sanctions list has roughly tripled in size since 2010. The 2022 freeze on $300 billion in Russian central bank reserves further consolidated a concern of every finance ministry in the Global South that dollar access is politically conditional. A senior China analyst at Trivium put the consequence plainly to CNN earlier this year: “We’re in a really unique moment in time, because people are becoming disillusioned with the dollar .”
On top of the sanction threat with frozen dollar assets is the tariff volatility under Trump 2.0. Mexico, Brazil, and Colombia have all faced abrupt tariff threats with little warning, and these tariffs are often deployed as leverage for unrelated policy questions, for example, receiving deported illegal immigrants from the United States. For Latin American central banks, this transforms dollar reserves from a stable store of value into a politically exposed asset. Add to this the open questioning of Federal Reserve independence and the cost of governments holding dollars only continues to rise. Beijing’s Move in Latin America China has long made inroads into yuan internationalization in regions like the Middle East, Russia, and countries receiving Belt-and-Road-Initiative investments through the years. Beijing has spent decades building an offshore RMB ecosystem through cross-border payment rails, regional yuan-clearing banks, and official bilateral swap lines. The People’s Bank of China currently operates a bilateral swap line network totaling about 4.16 trillion yuan with more than 40 central banks. CIPS, China’s Cross-Border Interbank Payment System, has also emerged as a partial alternative to SWIFT for yuan clearing.
Yuan influence in Latin America, however, has historically been weak. Beijing has been slowly building out the infrastructure and waiting for a strategic window to open to leverage this infrastructure and meet the demand with its yuan supply. From establishing the continent’s first yuan clearing bank in Chile in 2016 to signing a memorandum to establish another yuan clearing bank in Brazil in 2023, Beijing is slowly expanding its offshore RMB plumbing infrastructure to accommodate its growing trade volume in the region.
That plumbing infrastructure is now in full motion. In 2018, Brazil’s central bank held no yuan reserves. Five years later, the central bank’s yuan reserves surpassed the euros and became the second-largest foreign reserve on its balance sheet. As China’s largest trade partner in the region, Brazil has been increasingly settling its bilateral trade with China in the two countries’ currencies , bypassing dollar conversion for trade items such as soy, iron ore, and beef.
Argentina’s case is even more revealing. Under the previous government, yuan reached up to 48 percent of the central bank’s foreign reserves. During a 2023 dollar shortage , Buenos Aires even used yuan to partially repay its 2018 IMF loan, making Argentina the first country to ever use Chinese yuan to settle debt obligations to the IMF.
When Latin American governments run out of dollars and Washington offers no liquidity backstop, they reach for whatever currency is available. This is not ideological alignment with Beijing but rational hedging by sovereigns who have learned that dollar access is conditional and dollar liquidity is not guaranteed for emerging economies in a crisis. Therefore, Beijing simply sees an opportunity and comes in to fill the gap created by Washington’s own policies. The Exorbitant Burden Valéry Giscard d’Estaing famously called the dollar’s world currency status America’s “exorbitant privilege.” What Washington is now discovering is the inverse, that the dollar has become an exorbitant burden. The mechanism is straightforward. Each use of the dollar as a coercive instrument depreciates the dollar as a reserve asset. Each tariff threat against a hemispheric partner is a marketing campaign for China’s CIPS.
If the United States wants to preserve its world currency status and the exorbitant privilege, it needs to do three things. It must treat sanctions as a depletable resource and coordinate with allies so that unilateral U.S. action becomes rarer. It must also reinvest in financial diplomacy in the Western Hemisphere by extending the Fed’s dollar swap lines to countries beyond Mexico and Brazil. Finally, it must compete on infrastructure investment, not rhetoric. This means that the U.S. government should recapitalize the existing infrastructure—the Development Finance Corporation, EXIM Bank, and the G7 Partnership for Global Infrastructure—to close deals that can bring positive social and economic values to Latin America.
The yuan will not displace the dollar anytime soon. But if the United States continues to pursue policies that compromise the dollar’s credibility, the timeline of yuan internationalization in Latin America will only accelerate.
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