Despite a regional decline, Honduras showed a substantial 33 percent increase in foreign direct investment (FDI) in 2023 compared to 2022. Though below past decade figures, this growth signals the potential for further economic development and optimism in the economic landscape.

Even in the face of the 2023 regional context, Latin America and the Caribbean have demonstrated remarkable resilience. The region received $184.304 billion in FDI flows, a figure 9.9% lower than in 2022 but still above the past decade’s average. The region’s share of global FDI flows (14%) was higher than the average percentage for the 2010s, providing reassurance in the face of the decline.

The study indicates that the decline in FDI received by Brazil (-14%) and Mexico (-23%), the two countries with the highest shares of total inflows, largely explains the regional result. In South America, Peru also experienced a significant decrease in FDI inflows (-65%), while Argentina and Chile saw increases (57% and 19%).

In Central America and the Caribbean, more investments were received than in 2022 (12% and 28%, respectively). Almost all countries received more FDI in Central America, with notable growth in Costa Rica (28%) and foreign investment in Honduras (33%). The increase in the Caribbean is mainly due to increased inflows to Guyana (64%) and the Dominican Republic (7%), highlighting the region’s attractiveness to investors.

The Three Traps

“Foreign direct investment can help address, in particular, the first of the three development traps in which Latin America and the Caribbean are mired: the low growth capacity trap. To achieve this, investment attraction policies need to focus on attracting investments. What happened after their establishment? These policies must be connected with the countries’ and territories’ productive development policies. This requires strengthening technical, operational, political, and prospective (TOPP) capacities in this area,” said José Manuel Salazar-Xirinachs, Executive Secretary of ECLAC, when presenting the study’s main conclusions.

From a sectoral perspective, 46% of FDI in 2023 was directed to services, although this sector received less investment than in 2022 (-24%). Investments in manufacturing grew for the second consecutive year (+9%), with increases in Central America, Colombia, Mexico, and the Dominican Republic. The natural resources sector investments also increased (+16%) despite the decline recorded in Brazil.

Regarding FDI components, reinvested earnings increased by 15%, representing almost half of the inflows in 2023, while capital contributions and inter-company loans decreased by 22% and 36%, respectively. The United States and the European Union were the leading investors, with the former accounting for 33% of the total and the EU 22% (excluding the Netherlands and Luxembourg). China, on the other hand, reduced its investments in the region.

On the other hand, regional investment abroad (translatinas) fell by 49%, returning to normal levels after the peak reached in 2022. With few exceptions, FDI continues to concentrate in sectors and countries that offer natural resources or relatively cheap labor, according to ECLAC.

Keys to attracting more FDI: More Added Value, Diversification, and Skilled Labor

To attract foreign direct investment, ECLAC recommends adding more value, in the case of natural resources, as well as diversifying and scaling up to sectors with more skilled labor and increasing technological spillovers and productive linkages resulting from this investment. “Countries must base their implementation on high-level political governance arrangements and strengthen their TOPP capacities,” emphasized José Manuel Salazar-Xirinachs. It is also urgent to involve public, private, academic, and civil society actors in constructing and implementing FDI strategies to ensure legitimacy, cooperation, and effective utilization of post-establishment benefits.

There is a need to equip Investment Promotion Agencies with resources, qualified personnel, and stability in their efforts to promote investments effectively; implement a rigorous monitoring and evaluation system for policies, incentives, and conditions; develop policies and projects that strengthen the business environment, including well-designed incentives and the promotion of cluster initiatives to address specific bottlenecks; and foster research and development (R&D), human talent training, and supplier development, among others.

Focused Sectors

ECLAC has proposed at least fourteen driving sectors in industry, services, and areas related to the Grand Impulse for Sustainability. These include the pharmaceutical and life sciences industry, the medical devices industry, the export of modern ICT-enabled services, the care economy, digital government, energy transition, electromobility, the circular economy, bioeconomy, sustainable water management, and sustainable tourism. FDI attraction efforts must take a sectoral and cluster approach to maximize benefits.

In summary, while Foreign Direct Investment (FDI) in the region has experienced a general decline, foreign investment in Honduras stands out with a notable 33% increase in 2023, reflecting a positive trend amid broader regional challenges. This rise in foreign investment in Honduras underscores its growing appeal to international investors and its potential as a competitive player in the global market. Moving forward, it will be crucial for Honduras to leverage this momentum by implementing strategic policies that enhance its investment climate, drive value-added sectors, and foster sustainable economic growth. As the region navigates a shifting landscape, Honduras’ recent success highlights the importance of tailored investment strategies and robust governance in achieving long-term development objectives.

The oil and gas sector in Latin America is a dynamic and diverse landscape, constantly evolving due to many factors. Each country’s unique trends and challenges, including Colombia, reflect this diversity.

Market Openness and Interventionist Policies

While some countries are making rapid progress, others still face significant obstacles. For example, Brazil, Argentina, Ecuador, and Peru have sought to open their oil and gas markets, each with unique challenges. At the same time, countries like Venezuela and Mexico follow more interventionist state policies in Latin America’s oil and gas sector, facing their own hurdles.

Energy Transition and Regional Variations

Understanding the energy transition and its regional variations is crucial. In 2022, Colombia ranked 29th out of 115 countries in the World Economic Forum’s Energy Transition Index 2021. Hydrocarbon companies like Ecopetrol have also driven innovation through their Econova network, generating USD 12 million (approximately COP 48.654 billion). According to the Ministry of Mines and Energy, the country aims to achieve 50% renewable energy in its energy mix by 2030.

Data from the Energy Transition Report in Latin America, a study conducted by Aggreko with professionals from the electricity and infrastructure sectors in 13 Latin American countries, helped us map some of these energy scenarios in the region. Therefore, what may represent significant progress in the energy transition for some may not be the case for others. The need for a tailored approach is evident, as in a country with a massive presence of heavier fossil fuels in the energy matrix, transitioning to a lower-emission fuel like natural gas might make sense, as is the case with Peru. In others, the vision might differ with many renewables in the energy matrix. In other words, we have very different situations to address in this area.

Colombia’s Approach and Challenges

The opening of the oil and gas market in Latin America presents a diversity of approaches and policies among the countries in the region. At the same time, the Colombian government takes an aggressive stance on the energy transition, prioritizing investments in wind, solar, and hydroelectric energy and refusing to grant new oil exploration licenses. Ecopetrol and Shell delineate discovered offshore fields to increase oil and gas reserves. This stance is criticized for reducing energy and economic security, with a 35% drop in drilling activities in the last two years, resulting in fewer jobs and revenues.

On the other hand, Colombia faces significant challenges, such as decreasing natural resources and an insufficient gas supply. According to the Colombian Association of Natural Gas (Naturgas), the gas supply will not meet demand next year, with projected sales of 43.5 Gbtud in 2025 and 160.5 Gbtud in 2026. To avoid shortages, Naturgas proposes complementing local supply with imported gas. From Aggreko’s perspective, exploring other alternatives to mitigate the impact of this situation on the oil and gas sector in Latin America is also crucial.

Balancing Energy Transition with Security

In this context, the energy transition, while necessary, must be carried out in a structured manner. Abrupt changes to renewable energy sources could compromise the country’s energy security, especially considering that renewable sources like wind and solar still face challenges related to reliability and storage. Latin America’s oil and gas sector, essential for energy security, demands a gradual transition, integrating renewable sources complementarily without abruptly eliminating traditional sources.

Thus, while Colombia aims to lead the energy transition, it must balance its policies to ensure long-term energy and economic security. The approach should be gradual, allowing new renewable energy storage and generation technologies to mature and integrate effectively into the energy matrix. 

Regional Market Dynamics and Investments

This has driven investment and created jobs, especially in the natural gas sector. Recently, several state-owned companies in Latin America have been selling mature and non-strategic assets to stimulate economic activity, such as the sale of 55 fields in Argentina, which has generated significant interest. This approach is being adopted slowly in other countries. Carbon capture is gaining prominence with investments in CCUS technologies. In the energy transition, natural gas remains key, and Latin America, with its vast reserves, is well-positioned in this process.

When discussing energy transition, it is essential to consider the growing environmental awareness and the quest to reduce carbon emissions. Companies in the oil and gas sector in Latin America are investing in renewable energy and carbon capture technologies to mitigate their environmental impact and adapt to global market demands.

Country-Specific Developments

Brazil: Petrobras has been selling mature and less strategic fields to smaller private companies, stimulating investment and job creation.

Venezuela: Like Mexico, Venezuela has adopted statist and monopoly policies, which hinder the attraction of private investment. The country’s oil production has dropped significantly, and the lack of investment prevents a quick recovery. The complicated political and economic situation further worsens the sector’s outlook.

Mexico: Mexico’s oil production has declined, falling from over 3 million barrels per day in the past to around 1.8 million today. Despite government efforts to boost output through state investments, Pemex, the Mexican state-owned company, is the most indebted oil company in the world.

• Argentina: Adopting a more open approach towards the market and asset privatization, YPF sells mature and less strategic fields to private companies, stimulating investment and the service chain.
• Chile: Chile, one of the countries in the region most concerned about the energy transition, is seeking neutrality by 2050. Several green hydrogen and wind energy projects exemplify the country’s willingness to move in this direction.
• Ecuador: Despite significant oil and gas reserves, Ecuador is primarily an exporter of crude oil and imports most of its refined hydrocarbon needs. The country is focusing on refining and seeking diversification and sustainability.
• Guyana: Following a significant oil discovery in 2019 by ExxonMobil and Hess Corporation, Guyana is attracting major oil and gas service companies. The country is expected to produce 1.5 million barrels per day by 2027.
• Suriname: Supported by TotalEnergies, Suriname follows a similar path to Guyana, with significant investments planned for Block 58. Suriname’s development is expected to mirror Guyana’s success.

Conclusion

In conclusion, Latin America’s oil and gas sector navigates a complex landscape of economic, environmental, and technological challenges and opportunities. As countries in the region adopt varying strategies in response to their unique contexts, from Colombia’s cautious yet progressive energy transition to Brazil’s market liberalization and Venezuela’s state-centric policies, the future of the oil and gas sector in Latin America remains dynamic. Emerging players like Guyana and Suriname highlight the potential for transformative growth, while traditional leaders like Mexico and Argentina grapple with their own issues. The balance between advancing renewable energy and maintaining energy security will be crucial for the region’s sustainable development. As Latin America adapts to global trends and local demands, the oil and gas sector will be pivotal in shaping the region’s economic and environmental future.

Overview of Guatemala’s FDI Target

The Guatemalan government has launched a Guatemalan foreign direct investment strategy, recognizing FDI as a critical driver for the country’s economic development. Over the past 15 years, global FDI has reached $29.9 trillion. Latin America and the Caribbean have captured $3.58 trillion, equivalent to 11.93% of the total. Guatemala, the largest economy in Central America, has seen its FDI grow from $934 million in 2020 to $1.552 billion in 2023, showing an 18.41% increase. The target for this year is $1.65 billion, underscoring the significant role of FDI in Guatemala’s economic growth.

Regional FDI Comparison

According to a World Bank report, the FDI for the eight countries in the Mesoamerican region, from Belize to Panama and the Dominican Republic, is 5.06% of the total for Latin America, similar to the amount captured by Colombia during the same period. The countries in this region that have attracted the most foreign investment are Costa Rica and the Dominican Republic, each exceeding $4 billion annually. In the case of Guatemala, the largest economy in Central America, although investment has been on the rise, the maximum captured during 2023 was $1.552 billion, showing a growth of 18.41% from 2020 to 2023, not considering the exceptional investment from Millicom of $2.2 billion in 2021, according to statistics from the Bank of Guatemala (Banguat).

Challenges and Goals

“FDI has been increasing every year. Since 2020, it has grown from $934 million to $1.65 billion, which is the target for this year. It’s not a bad number, but it’s not enough. Therefore, all efforts to improve this figure will be essential. We need to reach levels closer to those of the Dominican Republic and Costa Rica. This requires inter-institutional collaboration. Without good roads, ports, and airports, it will be challenging to attract the amount of FDI we need,” says Álvaro González Ricci, President of Banguat. This underscores the pivotal role of Guatemala’s foreign direct investment strategy in addressing these infrastructure challenges and its potential to boost FDI significantly.

Government and Private Sector Initiatives

Gabriela García, the Minister of Economy, is more optimistic, aiming to reach $1.7 billion in new FDI, excluding reinvestments. To this end, the Guatemalan government has officially launched the national Guatemala foreign direct investment strategy, a comprehensive plan that includes all measures and actions to promote the country as an investment destination. The strategy encompasses initiatives to improve infrastructure, develop human capital, and promote key sectors for investment. The Ministry of Economy (Mineco) coordinates this national initiative, consolidating seven years of work by various technical teams from the private sector, international cooperation, and the public sector, working together with a common goal: the integral development of the country in all socioeconomic aspects.

“With the presentation of this initiative, or the creation of a national agency for promoting foreign direct investment, additional hands will be needed to achieve results; this is where we are involved,” says Juan Esteban Sánchez, Executive Director of the private investment promotion agency, Invest Guatemala. He adds that while an investment attraction strategy with a realistic component is challenging and not a short-term endeavor, those with the knowledge and commitment to generating results understand this well. A private promotion agency can contribute to a workforce with knowledge, experience, and market intelligence. This specific approach, understanding how a company operates to address its needs and how we can assist, aligns with the government’s approach, as it is a matter of aligning interests and efforts with the ultimate goal of benefiting Guatemala,” Sánchez explains. The Guatemala foreign direct investment strategy reflects this alignment of interests.

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Focus Areas for Investment

The government’s strategy prioritizes the analysis of sectors proposed for short-term investment attraction, such as processed food and beverages, apparel and textiles, IT and business services, contact centers, and BPOs. Mineco will expand the analysis to medium- and long-term economic activities for investment attraction as the strategy develops. The plan also prioritizes markets with which Guatemala has a historical relationship of investment and trade, supported by 19 investment agreements and 14 Free Trade Agreements. Additionally, it considers investment flows with growth and interest in the Central American and North American markets, providing a production and logistics platform for these areas. The Guatemala foreign direct investment strategy thus focuses on leveraging these trade relationships and market opportunities.

Infrastructure and Human Capital Development

Simultaneously, the government authorities under Bernardo Arévalo face the challenge of modernizing the country’s deteriorated infrastructure and promoting human capital development. These efforts are crucial for improving competitiveness in the medium term and attracting companies in more specialized sectors such as health services, electrical-electronic, biotechnology, medical devices, and the tourism industry. Additionally, there are plans to promote business opportunities across the country to link small and medium-sized enterprises to national and international value chains, similar to the experience with the Japanese plant Yazaki in Ayutla, San Marcos. The Guatemala foreign direct investment strategy will be critical to these efforts.

Conclusion

Guatemala’s ambitious FDI strategy, aiming to attract $1.65 billion, is a key part of its plan to boost its economic development. This strategy, which leverages the country’s strategic location and trade relationships, can significantly enhance Guatemala’s economic competitiveness and create new opportunities for local and international businesses. Over the past 15 years, Latin America and the Caribbean have captured $3.58 trillion in global FDI, with the Mesoamerican region, including Guatemala, securing a share of this total. Despite recent growth, Guatemala’s FDI remains below that of regional leaders like Costa Rica and the Dominican Republic. The Guatemalan government, led by the Ministry of Economy and supported by the private investment promotion agency Invest Guatemala, focuses on sectors such as processed foods, apparel, IT, and contact centers. The government’s strategy also emphasizes improving infrastructure and developing human capital to enhance competitiveness and attract specialized investments in the health services and biotechnology sectors.

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Uruguay is the South American economic leader in 2024. With its robust economic growth and outstanding per capita GDP, Uruguay is poised to lead South America’s economy over the next two years. Uruguay has outpaced regional giants like Brazil and Mexico, surprising the global economic community with its high per capita GDP and sustained growth. Uruguay has become a benchmark for stability and progress in a region marked by financial challenges and fluctuations.

Global and Regional Growth Trends

The World Bank report highlights that while global growth averaged 2.6% over the past three years, Latin America and the Caribbean faced a slowdown to 1.8%, with a projected recovery to 2.7% by 2025. In this context, the South American country has positioned itself through economic diversification and, notably, strategic investments in infrastructure. These investments, a testament to Uruguay’s forward-thinking economic policies, have been a critical factor in Uruguay’s financial success and effective government policies, establishing it as a Uruguay economic leader.

Uruguay’s Economic Performance

Which South American country has the best economy in the region in 2024? Uruguay has emerged as the South American country with the most resilient economy in 2024, standing out significantly in the region. According to World Bank data, its per capita GDP reached $18,109, aligning with developed economies. This achievement is a testament to Uruguay’s unwavering stability in the face of global economic challenges. With consistent economic growth and policies focused on human development, investment in infrastructure, and economic diversification, Uruguay has demonstrated that achieving high prosperity is possible even in an uncertain global environment, reinforcing its role as an economic leader.

Comparison with Brazil and Mexico

How did this country surpass Brazil and Mexico by two times? Uruguay has surpassed Brazil and Mexico’s per capita GDP, which is noteworthy. The Brazilian nation’s vast expanse, abundant natural resources, and the Mexicans’ strategic proximity to the United States have yet to match Uruguay’s economic performance.

Brazil is projected to grow its GDP by 2% in 2024, while Mexico’s per capita GDP is $10,327. Uruguay’s success is attributed to its stable economic policies, focus on diversification, and continued investment in infrastructure. These actions have allowed Uruguay to create a favorable environment for development and investment attraction, further solidifying Uruguay’s position as the South American economic leader.

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Top 20 Economies in the Americas

What are the top 20 economies in the Americas? The top 20 economies in the Americas, in terms of per capita GDP and total GDP, reflect the continent’s diversity and economic development. Led by the United States and Canada, the ranking includes Uruguay as a prominent regional leader. Here is the complete list:

• The United States
• Canada
• Uruguay
• Panama
• Chile
• Costa Rica
• Argentina
• México
• Brazil
• Dominican Republic
• Colombia
• Perú
• Paraguay
• Ecuador
• Guatemala
• El Salvador
• Bolivia
• Honduras
• Nicaragua
• Haiti

Summary of Key Points

Economic Leadership: Uruguay stands out as the best economy in South America in 2024, surpassing Brazil and Mexico.

High Per Capita GDP: Uruguay achieved a per capita GDP of $18,109, comparable to developed economies.

Constant Growth: Uruguay’s success is attributed to its sustained economic growth, diversification, and effective government policies.

Strategic Investments: Infrastructure and human development investment has been crucial to its economic progress.

Regional Comparison: Brazil and Mexico have yet to match Uruguay’s economic performance, highlighting the South American economic leader’s stability and investment appeal.

In 2024, Uruguay has emerged as the leading economy in South America, joining the ranks of global economic leaders like the United States and Canada. Surpassing regional giants such as Brazil and Mexico, Uruguay’s remarkable economic performance is highlighted by its high per capita GDP of $18,109, positioning it alongside developed economies. This success is attributed to Uruguay’s robust economic growth, strategic investments in infrastructure, and effective government policies. While global growth averaged 2.6% and Latin America and the Caribbean faced a slowdown to 1.8%, Uruguay’s diversified economy and sustained growth have set it apart as the South American economic leader. Brazil is projected to grow its GDP by 2% in 2024, and Mexico’s per capita GDP stands at $10,327, yet both countries still need to match Uruguay’s economic achievements. The World Bank’s report underscores Uruguay’s resilience and practical strategies, focusing on human development and infrastructure investment. The top 20 American economies, led by the United States and Canada, reflect the continent’s diversity, with Uruguay standing out as a regional leader. This impressive economic performance

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The Dominican Republic has established itself as a regional leader in the production of medical devices in Central America and the Caribbean. In 2023, exports from Dominican Free Zones reached $2.49 billion, representing over 31% of the total export value from these areas. This remarkable growth in the Dominican Republic’s medical device manufacturing exports is mainly due to the presence of 40 companies dedicated to medical device manufacturing, which have created 32,358 jobs, with 67.6% of these held by women. Luis José Bonilla Bojos, president of the Dominican Association of Free Zones (Adozona), emphasized the importance of this industry to the national economy, highlighting that seven of the top 20 multinational companies in the sector operate in the country. These companies are involved in expanding and optimizing their production methods.

Refined Logistics and Manufacturing Capabilities

A joint study by the General Directorate of Customs (DGA) and the American Chamber of Commerce of the Dominican Republic (Amchamdr), titled “Study of the Hub Segment,” reveals that the country has refined its logistics and manufacturing capabilities, specializing in medical device production. This specialization has fostered a skilled and competitive workforce capable of performing complex assembly tasks at reduced costs. The rise in Dominican Republic medical device manufacturing exports has also highlighted the need for more qualified human resources, especially in operational roles.

Diverse Medical Device Production

Among the medical devices manufactured in Dominican Free Zones are products for ostomy care, transfusion and cell therapy equipment, sterilization devices, specialized neurology tools, catheters, and cardiovascular access instruments, among others. The industry is distinguished by its growing demand for skilled labor, especially in sectors such as pharmaceuticals, high technology, telecommunications, apparel, footwear, and household appliances. However, the study notes a need for more qualified human resources, particularly in operational roles. The public and private sectors need to focus on training specialized labor, including women, in positions such as revenue and expense control, order preparation, and handling equipment like cranes and forklifts.

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Key Players in the Industry

Daniel Peña, Deputy Director of Technology at the DGA, stated that the Dominican Republic has become one of the leading exporters of medical devices in Latin America, trading 70% of the tons of these products exchanged in Central America and Colombia. Peña highlighted that the efficiency of Dominican labor and the ability to offer lightweight manufacturing solutions have been critical factors in increasing the country’s competitiveness in this industry. Modern port and airport facilities have supported the increased volume of Dominican Republic medical device manufacturing exports, significantly improving the country’s logistical capabilities. This has solidified its role as a strategic node in the region. The connection with Europe, North America, and South America positions the Dominican Republic as a cross-docking or multimodal center, facilitating international trade and strengthening its role in the global economy.

Major Manufacturers

Some major medical device manufacturers in the Dominican Republic include prominent multinational companies such as Medtronic and Edwards Lifesciences. Medtronic, a global leader in medical technology, has a significant presence in the country, focusing on cardiovascular and diabetes management devices. Edwards Lifesciences, known for its advanced heart valve technologies and critical care monitoring, further contributes to the country’s growing medical device sector. These companies drive the sector’s growth and enhance the Dominican Republic’s reputation as a leading hub for medical device manufacturing in the region. Their presence underscores the country’s robust manufacturing capabilities and strategic importance in the global medical device market.

The Dominican Republic has emerged as a leading force in medical device production within Central America and the Caribbean, as evidenced by its $2.49 billion in exports from Dominican Free Zones in 2023, which account for over 31% of the total export value from these areas. This significant growth in Dominican Republic medical device manufacturing exports is attributed to the presence of 40 dedicated companies, generating 32,358 jobs, with a notable 67.6% held by women. The country’s advanced logistics and manufacturing capabilities, highlighted in a joint study by the General Directorate of Customs (DGA) and the American Chamber of Commerce of the Dominican Republic (Amchamdr), have fostered a skilled workforce capable of handling complex assembly tasks at competitive costs. Significant players like Medtronic and Edwards Lifesciences contribute to this growth, further establishing the Dominican Republic as a critical hub for medical device manufacturing. Modern port and airport facilities have bolstered the country’s role as a strategic node in regional and global trade. As the Dominican Republic’s medical device manufacturing exports continue to rise, the country enhances its global market position and underscores its strategic importance in international trade.

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