Foreign investment in Latin America's second-highest recipient, Mexico, surge by 47.9% according to CEPAL.
In a recent report by the Economic Commission for Latin America and the Caribbean (ECLAC), it was revealed that the increase in Foreign Direct Investment (FDI) in Latin America and the Caribbean (LAC) in 2024 was primarily driven by the reinvestment of profits rather than new capital contributions.
The growth in FDI inflows to LAC in 2024 was mainly due to the reinvestment of earnings by firms already operating in the region, rather than new capital injections. New capital contributions remained flat, indicating that although companies are plowing back profits to expand or maintain their presence, fewer new investors are committing fresh capital to the region.
This situation signals challenges in attracting new foreign investors despite overall FDI increasing by 7.1% to nearly $189 billion. The stagnation of new investors’ interest contrasts with a rise in project announcements, primarily in hydrocarbons, while sectors such as renewable energy and technology-intensive industries lost ground.
The limited new capital inflows suggest structural or external uncertainties impacting investor decisions, such as changes in global trade policies, tariff adjustments (especially in the U.S.), or broader economic concerns impacting the region's competitiveness.
Mexico was one of the countries that experienced a significant increase in FDI in 2024, with an annual growth rate of 47.9%. The United States was the largest investor in LAC, accounting for 38% of the value invested.
José Manuel Salazar-Xirinachs, the Executive Secretary of ECLAC, pointed out that investment in Latin America and the Caribbean increased in 2024, but it was accompanied by a geographical and sectoral concentration. He emphasised the importance of capital flows in the current international context.
Salazar-Xirinachs also highlighted that digital transformation presents a great opportunity to address the traps of inequality, requiring more effective public policies. However, he stated that FDI is not reaching sectors for the sustainable development goals, which is a cause for concern.
The potential for growth in the exploitation of minerals in Latin America and the Caribbean is significant, but it continues to export with low added value. The report does not specify which sectors are experiencing geographical and sectoral concentration in FDI.
In other news, Roberto Servitje, the founder of Grupo Bimbo, passed away. Known for his proactive approach and high sense of cooperation, Servitje's contributions to the region's economy will be remembered.
The report does not provide any specific information about the current context influencing FDI in LAC. It also does not provide information about the sectors that are not receiving FDI for sustainable development goals. Capital contributions for FDI in LAC have been at their minimum values since 2010.
In the current business landscape, while the overall Foreign Direct Investment (FDI) in Latin America and the Caribbean (LAC) is increasing, the growth primarily stems from the reinvestment of profits by existing businesses, rather than fresh capital contributions from new investors (states, businesses, investing). This indicates that there might be structural or external uncertainties impacting investor decisions, such as changes in global trade policies or economic concerns, which could be hindering the inflow of new capital (finance).
