In a Context of Marked Geopolitical and Global Technological Rivalry, Exacerbated by U.S. Tariff Policy, Foreign Direct Investment in Latin America and the Caribbean Grew Just[...]

In a scenario of great uncertainty and heightened global tensions, Latin America and the Caribbean received $194.233 billion dollars in Foreign Direct Investment (FDI) in 2025, or 1.7% more than in 2024, although results were uneven across destination countries and sectors, the Economic Commission for Latin America and the Caribbean (ECLAC) reported today.

The relative weight of FDI in the region's economies varies significantly between countries, but on average, the FDI received by the region as a share of Gross Domestic Product (2.8%) and gross fixed capital formation (14.0%) held steady in 2025, according to the annual report Foreign Direct Investment in Latin America and the Caribbean 2026: Navigating the New Global Context, presented by ECLAC's Executive Secretary, José Manuel Salazar-Xirinachs, at a press conference in Santiago, Chile.

The flagship publication indicates that the majority of countries in South America and Central America received more investment in 2025, whereas the dynamics in the Caribbean were heterogeneous.

Brazil, which received $77.676 billion dollars (40% of the total), and Mexico, which obtained $43.221 billion dollars (22%), accounted for 62% of all FDI inflows in 2025. In the case of Brazil, these inflows increased, nearing the highs achieved in the 2010s. Mexico, meanwhile, received the third-highest amount of FDI since 1990, despite a negative year-on-year change.*

After Brazil and Mexico, the countries receiving the most FDI in 2025 were Chile (7% of the total), Peru (6%), Colombia (6%), Guyana (5%), Costa Rica (3%) and the Dominican Republic (3%).

"In the current global context of weaponized interdependence, understanding the relationship between trade and Foreign Direct Investment is key to designing policies that would allow us to move towards more productive, inclusive and sustainable development. In Latin America and the Caribbean, the main difficulty lies, more than in a lack of instruments, in the coherent and strategic integration of trade, investment and productive development agendas, which limits the transformative impact that FDI could have in the region," José Manuel Salazar-Xirinachs, ECLAC's Executive Secretary, underscored.

In 2025, reinvested earnings (51%) remained the main component of FDI, despite declining year-on-year. It was followed by equity investment (34% of the total) and intercompany loans (15%).

With regard to destination sectors, inflows into services (+19.5%) and natural resources (+7.0%) increased, while inflows into manufacturing (-17.2%) declined. Thus, in 2025, services received 53% of FDI, manufacturing 31% and natural resources 16%.

At the same time, 67% of the investment entering the region in 2025, from identifiable sources, came from the United States (35%) and Europe (32%). However, the publication notes that less investment was received from the United States (-11%) last year, while inflows from Europe increased.

As in the rest of the world, the highly uncertain environment had a particularly negative effect on investment announcements in the region, the report indicates. In 2025, 1,326 projects worth a total of $114.1 billion dollars were announced in Latin America and the Caribbean, which represents a -10.2% decline versus 2024 in the number of announcements and a -34.3% drop in the dollar amount.

In contrast, FDI outflows from the region have recovered in the last three years, totaling $62.286 billion dollars in 2025, up 19.3% from 2024 and reaching the second-highest figure since 2010. Public policies can play a key role in the effort to steer these investments, the regional organization says, so that they can create benefits in terms of productivity, technological learning, innovation and market access, while averting fiscal and production-related risks.

Finally, this year's report includes a chapter analyzing the ways in which FDI in the region may be affected by the recent changes to the United States' tariff policies. The findings suggest that the region's degree of exposure to changes in U.S. trade policy is highly heterogeneous across countries and sectors, and depends on each country's production structure as well as its integration in regional value chains.

Policies, institutions and capacities matter, ECLAC emphasizes, which is why it proposes the following policy recommendations for navigating the new global context:

1. Diversify export markets and sources of FDI, particularly in economies in which a high share of total exports goes to the United States.
2. Bring together trade, investment and productive development within a policy framework aimed at maximizing the impact of existing investment.
3. Coordinate investment and trade promotion agencies with the bodies responsible for promoting other areas of productive development (human capital, technology transfer and innovation, among others).
4. Strengthen the technical, operational, political and prospective capabilities of investment and trade promotion agencies, and incorporate mechanisms for monitoring and learning in response to changes in the environment.

5. Create and strengthen regional coordination arrangements to expand opportunities for trade, investment and productive development among the countries of the region.

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   * Data for Mexico were provided by the Bank of Mexico and compiled in accordance with the Balance of Payments and International Investment Position Manual: Sixth Edition (BPM6) (International Monetary Fund [IMF], 2009), using the assets and liabilities principle. This explains the difference from the figure published by Mexico's Ministry of Economic Affairs using the Balance of Payments Manual. Fifth edition (BPM5) (IMF, 1993) and the directional principle.