Home Capital Raising & Corporate Finance The Duality of Latin America’s Foreign Direct Investments
Author: Nic Wirtz | Photos: Shutterstock
Concentration on mega-infrastructure projects masks a broader decline in foreign investments across the region.
This article appears in the October issue of Global Finance Magazine.
Foreign direct investment in Latin America and the Caribbean grew by just 1.7% in 2025, with the share of fixed capital at 14%. 1,326 projects were announced totaling $114.1 billion, a 34.3% drop compared with 2024. This is partly explained by investors prioritizing mega-infrastructure projects.
These include the transition to energy sustainability, lithium mining, and data center development. They require substantial capital but are concentrated in a limited number of projects. Historical obstacles could imperil the region’s nearshoring boom that could see upwards of $78 billion in exports with Mexico attracting $34.3 billion alone in the first half of 2025, according to a United Nations Economic Commission for Latin America and the Caribbean report .
“The pipeline of future projects is contracting sharply. A one-third drop in the announced value serves as a leading indicator that will manifest in the flows for 2027 and 2028, when the reinvestment of earnings will no longer suffice to offset the decline,” said Eric Molino Ferrer, managing partner of EMF Consulting.
Reinvested earnings accounted for 51% of the total FDI inflows, followed by capital contributions (34%) and intercompany loans (15%). Transnational companies are preferring to inject resources into existing assets or large-scale projects with proven profitability, rather than diversifying risk across a range of new ventures.
Financial analyst Daniel Suchar argued that the gap between attracted capital and physical progress of projects does not imply an inability of the region to complete investments. Instead, it highlights structural bottlenecks in the execution phase. Multilaterals have repeatedly noted that the region remains attractive for investment due to its natural resources, including critical minerals and its geographic location. Delays to these projects are mainly caused by bureaucratic hurdles, fragmented environmental permitting processes, and a persistent gap in complementary logistics infrastructure.
“A symptom of bad governance and institutionality is administrative discontinuity: each government inherits projects that it cannot capitalize politically and lets them die,” Ferrer said.
The region is attempting to change this; Peru’s $1.3 billion Chancay port was completed in three-and-a-half years and is a shining example of China’s Belt and Road Initiative . Other countries have fared less well with this outreach, especially in Central America. The subregion is attempting to compete with the Panama Canal with its own port projects, connecting Atlantic and Pacific facilities.
These include the $1.62 billion joint venture with Turkish operators Yilport in El Salvador to upgrade national port infrastructure, and the $20 billion interoceanic project, which will see the U.S. Trade and Development Agency funding feasibility studies of a railway in Honduras and Guatemala’s ambitious Interoceanic Corridor.
Guatemala has been especially reluctant to use multilateral finance such as that available from the Central American Development Bank. Despite being a founding member and Central America’s largest economy, its loans are less than 10% of CA…