Despite commanding some of the world’s largest reserves of oil, gas, lithium, and copper, Latin America’s sovereign wealth funds (SWFs) remain small, traditional, and underleveraged. While Africa and Asia have embraced sovereign funds as engines of growth and innovation, Latin America's 12 SWFs are overwhelmingly stabilization funds, designed to smooth fiscal shocks but not to invest in the future.

• Over 50% of Latin America's population is under 30, but intergenerational savings mechanisms are rare.
• $8.6B in Chile's Pension Reserve Fund and $5.5B in Trinidad and Tobago’s Heritage and Stabilization Fund are among the largest in the region.
• Guyana’s Natural Resource Fund amassed $2B in four years, a rare example of a fund combining stabilization with development priorities.

A Model Stuck in Fiscal Firefighting

Latin America's SWFs have primarily operated as rainy-day funds, liquid pools of capital used to plug budget deficits during downturns.

• During COVID-19, Chile withdrew over $2B from its Economic and Social Stabilization Fund (ESSF) to support fiscal stimulus.
• Colombia lent $3B from its stabilization fund (FAEP) to its COVID emergency fund (FOME).
• Mexico’s FEIP continues to operate the world’s largest sovereign oil hedge, shielding fiscal accounts against oil price crashes.

Yet, few funds managed to grow beyond crisis response.
Even before the pandemic, average fiscal deficits ran at 3% of GDP across the region, leaving little room for long-term savings or strategic investment.

Roadblocks to Expansion: Scale, Politics, and Instability

The report identifies persistent barriers that explain why sovereign wealth funds in Latin America have not evolved like those in Africa, Asia, or the Gulf:

• Lack of fiscal surpluses: Unlike GCC countries, LAC nations historically spent resource booms rather than saving them.
• Political capture: Funds such as Venezuela’s FIEM were drained for discretionary spending, exacerbating instability.
• Institutional weaknesses: Many central banks focus solely on safeguarding assets rather than building investment capabilities.
• Talent gaps: Regional central banks struggle to recruit and retain skilled investment professionals.

As a result, even countries with SWFs, like Mexico and Chile, prioritize liquidity and stabilization over investment and development, with over 95% of funds like FMPED allocated directly to fiscal budgets.

The Lost Opportunity: Natural Resources and the Green Transition

Latin America holds the key minerals needed for the global energy transition:

• Chile, Bolivia, and Argentina hold over 50% of the world’s lithium reserves.
• Brazil, Peru, and Mexico rank among the world’s largest producers of copper and rare earth elements.

Yet the region risks repeating old mistakes: resource wealth without durable economic transformation.

Chile’s 2023 National Lithium Strategy recognizes the need for saving and reinvesting lithium revenues but, critically, lacks a clear investment vehicle like a strategic sovereign fund.

What Strategic Investment Funds Could Achieve

The report argues that Latin America must shift from stabilization to strategic investment. Lessons from Senegal, Gabon, and Indonesia show how sovereign wealth funds can:

• De-risk infrastructure and green projects, attracting private co-investors.
• Channel capital into strategic sectors, including energy, tech, and sustainable agriculture.
• Build domestic private sector ecosystems by taking early-stage equity risk.
• Scale financing beyond the limited budgets of national development banks.

Strategic funds have already catalyzed over $4B in co-investments in countries like Indonesia within just a few years.

A Latin American Example to Watch: Brazil’s FUNSES

Brazil’s FUNSES offers a local case study of innovation:

• $300M state-level fund using oil revenues to combine long-term savings with venture capital investments.
• Invests in local tech start-ups with strong ESG criteria.
• Aims to crowd in private capital through blended finance models.

FUNSES demonstrates that small-scale strategic investment models are possible even within fiscal constraints.

The Missing Piece: Governance and Scale

For sovereign funds to drive sustainable growth, good governance is non-negotiable.

• Implementation of the Santiago Principles, meaning transparency, accountability, financial orientation, is essential.
• Scale matters: initial capital must be large enough (e.g., Indonesia's INA started with $5B) to attract global institutional partners.
• Political commitment across electoral cycles is critical to avoid short-termism and capture.

Without scale, strategy, and governance, sovereign funds risk becoming yet another tool for fiscal patchwork, rather than a catalyst for transformation.

Key Takeaway

Latin America’s sovereign wealth funds are fiscal shock absorbers but not future builders. In a region rich with critical minerals and youthful populations, there is the possibility to reimagine sovereign investment models, from firefighting to future-making. If Latin American leaders can notes this moment, sovereign wealth funds could shift from being passive safekeepers of volatile revenues to active architects of sustainable prosperity.