FDI Inflows into Latin America are Looking Encouraging for 2025

• Foreign Direct Investment (FDI) into the Latin America and Caribbean region has recovered strongly in the last two years, following a Covid slump.  While data for 2024 has been mixed, Fitch Solutions remains optimistic that this is the beginning of a structural uptrend driven by several factors.
• First, efforts by United States (US) firms to ‘derisk’ their supply chains as the great power competition between the US and China rumbles on should support nearshoring flows into Mexico, Central America and parts of the Caribbean in particular.
• Second, the green transition will boost demand for the likes of copper and lithium, helping to drive investment into the extractive sector in economies such as Argentina, Chile, Peru and to a lesser extent Bolivia.
• Fitch also sees some scope for these economies to move up the value chain, with the potential for more of the processing of these metals and minerals to be done in local markets.
• Latin America is expected to play a large role in feeding the world’s growing population, which is expected to rise by 25% to about 10Bn by 2050. This poses substantial upside to the Brazilian economy in particular, where land is still underutilised.
• Importantly, inflows into Central American countries – beyond Costa Rica and Panama – can provide employment opportunities, stemming the flow of migrants into the US.

(Source: Fitch Solutions)