The World Investment Report 2024 highlights that Foreign Direct Investment (FDI) to Latin America and the Caribbean slightly declined by 1% to $193 billion in 2023, maintaining relative stability amid global economic fluctuations. Foreign direct investment (FDI) refers to an investment made by an entity or investor from one country into a business or project in another country, with the intent of establishing a lasting interest or effective control over the foreign enterprise.The region saw increased value in greenfield investments in critical minerals and renewable energy sectors, signaling a shift towards sustainable and resource-centric economic activities.

• Overall Foreign Direct Investment (FDI) Trends: Latin America and the Caribbean saw a slight decrease in FDI inflows, dropping by 1% to $193 billion in 2023. This relative stability, amidst global economic uncertainties and challenges such as high interest rates and geopolitical tensions, underscores the region’s ongoing attractiveness to foreign investors. The resilience might be attributed to the region's rich natural resources, strategic geographical location, and ongoing efforts to improve investment climates through policy reforms and trade agreements.

• Sectoral Investment: The region observed notable growth in the value of greenfield investment projects, particularly in sectors related to commodities, critical minerals, and renewable energies like green hydrogen and green ammonia. This trend reflects a global shift towards sustainability, driven by increasing environmental awareness and the transition towards green energy. Investments in these sectors are particularly significant for Latin America and the Caribbean due to their potential for economic diversification and leading roles in the global supply chains for critical minerals and renewable resources.
• Challenges in Project Finance: The decline in international project finance deals has affected the infrastructure sector significantly, a trend seen globally but with localized impacts in Latin America and the Caribbean. The decrease is likely due to tighter financing conditions, which have made large-scale infrastructure projects more challenging to fund. This downturn could hinder progress in crucial development areas such as transportation, energy, and water management, which are vital for long-term economic growth and sustainability in the region.
• Digital Government and Investment Facilitation: Emphasizing digital government solutions in the report points to a growing recognition of their role in enhancing investment climates. For Latin America and the Caribbean, improvements in digital governance could lead to more efficient administrative processes, better transparency, and increased ease of doing business. These enhancements are essential for attracting FDI by providing a more streamlined and investor-friendly environment, crucial for competing in the global market.
• Economic and Policy Environment:The investment policy environment in the region reflects a dual focus: facilitating and promoting investment while cautiously managing foreign influence in critical sectors. This balance is crucial for ensuring that FDI contributes positively to economic development without compromising national interests. Measures to promote investment have likely included reforms to improve the business climate, special economic zones, and incentives targeting key industries such as tech and manufacturing.
• Regional Economic Agreements: Latin America and the Caribbean's engagement in regional economic agreements significantly influences FDI inflows. Agreements such as the United States-Mexico-Canada Agreement (USMCA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have the potential to enhance trade and investment flows within the region and with global partners. These agreements typically provide improved market access, regulatory consistency, and dispute resolution mechanisms, making the region more attractive to foreign investors.
• Political Stability: Additionally, political stability plays a crucial role in maintaining and increasing FDI. Regions with stable governments and predictable policies tend to attract more foreign investments due to lower perceived risks. Conversely, areas experiencing political upheaval or significant policy shifts may see a decline in investor confidence, affecting FDI negatively. For Latin America and the Caribbean, maintaining political stability and a clear, consistent investment policy framework is essential to capitalize on the economic opportunities presented by FDI and regional trade agreements.