Relations between Spain and Uruguay are based on mutual respect, common values, and a long history of diplomatic cooperation. The two countries have continually sought to expand and deepen cooperation in several fields. At the center of this renewed engagement between Spain and Uruguay is the European Union-Mercosur (EU-Mercosur) free trade agreement, with both countries emerging as “strong supporters of the EU-Mercosur agreement since the beginning of the negotiations,” according to Spanish Ambassador Javier Salido Ortiz. The Ambassador stated these views in an interview with Diálogo Chico ahead of Spain’s National Day on October 12 in Montevideo.

A Win-Win Deal

The Spanish envoy said the EU-Mercosur agreement “would be very beneficial for both parties.” Ambassador Javier Salido Ortiz explained that the free trade agreement between the EU and Mercosur is “an opportunity to boost trade and investment on both sides, and everyone wins from it.” On the European side, the EU-Mercosur trade pact would “open an enormous market to export more industrial goods, high-value-added goods, and technology.” For Mercosur countries, the agreement is expected to “open a door for more exports, not just of agricultural goods, but also of raw materials to the EU, and also to attract the foreign investment required to modernize and speed up growth in those economies.”

In a sense, this is the precise balance of interests that the EU-Mercosur agreement is aiming to strike. The 28 EU member states and the four Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay) have been working for nearly two decades to hammer out a comprehensive trade and investment agreement that addresses the concerns and priorities of both sides. At the core of this agreement is the objective of removing tariffs on more than 90% of goods traded between the two blocs, enhancing regulatory transparency, and creating an enabling environment for sustainable, mutually beneficial trade relations.

For Uruguay, a South American nation that exports 30% of its GDP (primarily beef, soy, and dairy products), signing the EU-Mercosur trade deal would represent a major opportunity in the EU, the world’s largest trading bloc.

Building Bridges

In addition to the broader perspective of regional trade integration, Spain and Uruguay have taken important steps to further deepen bilateral cooperation. In this sense, the recent visit to Uruguay by Spanish Prime Minister Pedro Sánchez and Uruguayan President Yamandú Orsi was a clear demonstration of the strong ties that bind the two countries. During the meeting in Montevideo, both leaders signed multiple agreements on cooperation in areas such as sustainable development, gender equality, the fight against organized crime, consular assistance, and cultural exchange.

These accords underscore the multifaceted nature of Spain-Uruguay relations, which go far beyond the strictly economic sphere to include common commitments to social progress, democratic governance, and sustainable development. In this context, Spain’s development cooperation agency, AECID, has been working closely with the Uruguayan government on a range of projects aimed at promoting renewable energy, water management, digital transformation, and other strategic sectors.

Spanish Investment in Uruguay

According to Ambassador Salido Ortiz, “Spain, through its companies, is the leading foreign investor in Uruguay.” This is a significant statement that underscores the depth of the economic ties between Spain and Uruguay. Spanish companies have recognized in Uruguay an attractive destination for investment and expansion due to the country’s democratic stability, robust legal framework, and predictable investment climate.

“Uruguay’s democratic stability and legal security have been key factors that have encouraged so many Spanish companies to invest and create around 30,000 jobs both directly and indirectly,” Ambassador Salido Ortiz said. These investments cover a wide range of sectors, including banking, telecommunications, renewable energy, and logistics. Prominent Spanish companies operating in Uruguay include Telefónica, Banco Santander, and Acciona, among others.

The EU-Mercosur agreement would likely cement these economic links by providing Spanish investors with better access to the Mercosur market, including supply chains and export opportunities. At the same time, for Uruguay, the agreement would help attract more European companies seeking a reliable and stable base of operations in South America.

Emerging Areas with High Potential

Ambassador Salido Ortiz pointed to some “very promising potential” areas of Spanish investment in Uruguay, including renewable energy, water infrastructure, transport, and digitalization. Uruguay has positioned itself as a regional leader in clean energy, with over 95% of its electricity generated from renewable sources, such as wind, solar, and biomass. This fact perfectly aligns with Spain’s strength and technological leadership in the field of wind and solar power.

In the field of water management and infrastructure, Spanish companies have been helping Uruguay to address the challenges of sustainable water use and urban development. Digitalization is another fast-growing area where Spain can contribute its experience in the creation of smart cities, digital public services, and innovation ecosystems. This field, in particular, is becoming increasingly strategic for Uruguay’s long-term development.

In this sense, the EU-Mercosur agreement would provide a necessary institutional framework to support these types of investments. By promoting regulatory convergence, intellectual property rights protection, and sustainable business practices, the agreement would give investors more confidence to commit their long-term resources to projects that promote economic and environmental resilience.

Benefits for the Citizens

Ambassador Salido Ortiz said the biggest beneficiaries of the EU-Mercosur agreement would be the people of the two regions. “They are going to be able to access more variety of products and, with competition, these products will be cheaper,” the Spanish ambassador explained. This is one of the central tenets of free trade: provide consumers with more choice, lower prices, and at the same time stimulate innovation and efficiency among producers.

European consumers would benefit from better access to high-quality agricultural products from Mercosur countries such as Uruguay, Brazil, or Argentina (think, for instance, about Uruguayan beef, Brazilian coffee, or Argentine wine), whereas South American consumers would gain from an increased availability of European technology, pharmaceuticals, and machinery at more competitive prices.

In addition, the agreement places a strong emphasis on sustainable development, with clear provisions on environmental protection, climate change mitigation, and labor rights. This approach to trade and investment dovetails perfectly with Uruguay’s own commitment to sustainable growth and green energy, for which Uruguay is already a regional leader.

A Common Project

Spain’s support for the EU-Mercosur agreement is part of its wider strategy to deepen Europe’s engagement with Latin America. As one of the EU’s main gateways to the region, Spain has a critical role to play in terms of promoting mutual understanding, cooperation, and fair, balanced economic development.

For Uruguay, the EU-Mercosur agreement is a strategic opportunity, not only for export expansion but also to cement its position as a stable, reliable, and investor-friendly destination for European companies.

With a shared vision of democratic governance, open societies, and the rule of law, Spain and Uruguay are setting an example of how like-minded countries can find areas of cooperation to the benefit of their citizens and economies. As Ambassador Javier Salido Ortiz told Diálogo Chico, the EU-Mercosur agreement is not just a trade deal, but a framework for mutual progress and a symbol of a renewed partnership between two dynamic regions at the global stage.

Guatemala is emerging as a major industrial and technology power in Central America. Targeting the consolidation and expansion of production in well-established and new sectors (high technology, electronics, and semiconductors), Guatemala’s National Strategy to Attract Investment could play an important role in driving investment over the next five years.

Francisco González, president of the National Auto Parts Industry of Mexico, was one of the speakers in a recent Enade 2025 (National Meeting of Entrepreneurs for Development) panel who emphasized Guatemala’s strategic location, logistics, and development potential in the sector. Held on October 9, 2025, Enade 2025 is an event organized by the Foundation for the Development of Guatemala (Fundesa), bringing together high-level government and private sector representatives from both Guatemala and Mexico.

Guatemala for the Auto Parts Industry

In his speech at the Enade 2025 panel, González said that Guatemala has enormous opportunity and potential to participate in global value chains given its strategic location, the growing manufacturing and integration in global chains from the United States and Mexico, and its proximity to Guatemala. This is especially true for the automotive and auto parts industry, he added.

“We have in the last four years an increase of 44% of the automotive industry in the region,” González said. “If we take into account and coordinate the efforts to generate and add value to infrastructure, logistics, and technical capacity, Guatemala has enormous potential to become an important regional player and a fundamental partner within the auto parts industry.”

The panelists discussed the benefits and added value of products in the automobile industry and highlighted that without adequate energy, without adequate coordination between public and private sectors, without adequate logistics, and without adequate industrial planning in the region, attracting investments to a country like Guatemala is next to impossible.

The panelists also said that for the public and private sectors in Guatemala to work hand in hand in such a successful way, like Yazaki, for example, will depend on the energy that the country has and the industrial sectors, as well as opportunities, to attract the much-needed investments to expand the production capabilities in Guatemala.

“There are many countries in the world that are competing with Guatemala to attract investments from the automotive sector,” González added. “The lack of certainty in the justice system, in the institutions, politically, at times, can cause us to lose ground and even reduce the opportunities that we have at this time. We need to work with predictability and certainty; we need to improve competitiveness.”

Guatemalan Strategy to Attract Investment for Electronics and Semiconductor Manufacturing

In the future, the focus for the Guatemalan strategy to attract investment is on medium to long-term goals and will include the electronics industry, service centers, and the health sector, said Valeria Prado, Deputy Minister of Investment and Competition at the Ministry of Economy.

After electronics, the service centers and the health sector could also play a key role. Guatemala could be an interesting destination for shared service centers, particularly given its workforce’s strengths in education, language skills, and customer focus. The health industry is another sector that could be found attractive in Guatemala in the medium- to long-term, given the sector’s expansion in the region.

Electronics and semiconductors have already been long recognized as a sector in which Guatemala could, and should, play an important role. Semiconductors are of particular interest, given the high degree of value added as well as the industry’s record of success in Mexico. Given the disruption of global supply chains over the past few years and the realization that semiconductor production is not nearly as diversified as other goods, the production and assembly of semiconductor chips is an area where Guatemala can truly differentiate itself and offer new value to global supply chains.

Semiconductors have been the foundation of technological innovation and will remain so in the future. Integrated into everything from household appliances to medical equipment and almost all electronic devices, the global market for semiconductors is forecasted to grow to $710 billion by 2028, from $450 billion in 2022. The production of chips is complex, with a whole range of equipment needed to design, develop, and test the chips, meaning that just about every player in the supply chain is open to working with new and innovative players in regions that can meet the industry’s high requirements when it comes to logistics, skills, incentives, and production capabilities.

“The most important thing for now is to set clear, short-term objectives, medium-term objectives, and long-term objectives,” said Deputy Minister Valeria Prado. “It is a fact that the Guatemalan strategy to attract investment is already consolidating some sectors, but we want to take it further and deepen these with more added value and longer-term visions.”

The Government in Action

The Guatemalan strategy to attract investment has the support and participation of the government and a very clear direction of where it wants to take the country, from short-term, medium-term, and long-term objectives. In the short-term, the most important elements are the strengthening of traditional industries such as light manufacturing, processed foods, textiles and apparel, as well as beverages.

In the medium-term, the Guatemalan strategy to attract investment is looking into broadening horizons and attracting investment in new high technology industries such as the electronics industry, service centers, and the health sector. And for long-term objectives, Guatemala is setting its sights on high-tech and advanced manufacturing industries, including semiconductors.

Toyota is exploring alternatives to restart its vehicle production in Brazil after a severe storm destroyed its engine plant in Porto Feliz (SP). The automaker has admitted that it could take months to resume operations, and all domestic production is currently compromised. This situation has sparked concern for the company, its workforce, and Brazil’s automotive industry, given Toyota’s role as a major player in the national market.

Storm Damage Halts Production in Porto Feliz

The Porto Feliz engine plant, a critical facility for Toyota in Brazil, suffered extensive damage during the recent storm. Preliminary assessments indicate structural damage considered extremely severe, with an overhead crane falling onto machinery and directly compromising the assembly line. According to Toyota, restarting the engine plant will take several months, making immediate resumption of car production in Brazil impossible.

The engines manufactured in Porto Feliz are vital for Toyota’s two main vehicle factories in Brazil. In Sorocaba (SP), they are used in the Corolla Cross and Yaris models, including units destined for export, as well as the initial units of the Yaris Cross, whose national launch has now been delayed. In Indaiatuba (SP), the engines power the Corolla sedan.

Engine Models Affected

The engines affected by the disaster include the 2.0 Dynamic Force, used in the Corolla line, and the 1.5 flex engine, adopted for the Yaris family. Toyota was also preparing to assemble a hybrid flex variant of the 1.5 engine domestically, intended for the top trims of the Yaris Cross compact SUV.

The 2.0 engine version used in Brazil, identified by the codename M20A-FKB, is produced in multiple Toyota plants globally. According to Automotive Business, four factories abroad—located in Thailand, Poland, the United States, and Japan—could potentially supply engines to Brazil. This creates an opportunity for Toyota to import engines temporarily to sustain car production in Brazil while the Porto Feliz plant undergoes repairs.

Toyota’s Disaster Response Protocol

Toyota is no stranger to extreme weather events. The company has a disaster response protocol that outlines measures to minimize disruption during emergencies. This includes supply mechanisms to avoid production gaps and logistical tools designed to mitigate damage.

In the case of Porto Feliz, the preliminary damage assessment indicates that the plant cannot resume operations in the short term. Toyota has revealed that the plant may not return to full operational capacity until 2026, which underscores the severity of the situation. As a result, exploring alternative engine supply options has become a strategic priority to maintain car production in Brazil.

Importing Engines as a Temporary Solution

One potential solution Toyota is considering is importing engines from its international factories. This approach aims to maintain production continuity in Sorocaba and Indaiatuba. By leveraging global supply chains, Toyota hopes to minimize the disruption to Brazil’s automotive market and fulfill both domestic and export demands.

However, importing engines is not without challenges. Logistics, customs clearance, and transport costs all play a role in how quickly the engines can reach Brazilian plants. Despite these hurdles, the move is seen as necessary to sustain car production in Brazil during this unforeseen crisis.

Workforce Protection Remains a Priority

Despite the production challenges, Toyota has assured that it will not lay off employees in the affected plants. The Sorocaba and Region Metalworkers’ Union confirmed that the company is committed to preserving jobs, at least in Sorocaba. The complex provides 4,500 direct jobs and supports a supply chain that generates roughly seven indirect jobs for every direct position.

“The union guarantees that there will be no layoffs. The trust built over the years has always allowed us to find solutions in difficult situations, such as during the pandemic. Now, faced with the climate crisis that halted production in Sorocaba, Porto Feliz, and Indaiatuba, we are once again mobilized to ensure peace of mind for workers and alternatives to keep the industry active,” said Leandro Soares, president of the Metalworkers’ Union of Sorocaba.

Toyota has also begun discussions with the unions to explore alternatives aimed at maintaining employment across the three production units. Proposals will be presented for approval and implemented on an emergency basis, further demonstrating the company’s commitment to its workforce while seeking solutions to resume car production in Brazil.

Economic Impact of the Porto Feliz Plant Closure

The Porto Feliz plant plays a critical role in Brazil’s automotive sector. Beyond directly employing thousands, it supports a network of suppliers, logistics companies, and ancillary services. The temporary halt in engine production has repercussions throughout the industry, from dealerships awaiting vehicle shipments to suppliers dependent on consistent demand.

Maintaining car production in Brazil is essential not only for Toyota’s business continuity but also for the broader Brazilian economy. The automotive sector represents a significant portion of industrial output and export revenue. Any prolonged interruption can affect GDP contributions, trade balances, and employment rates in the sector.

Global Supply Chains as a Strategic Advantage

Toyota’s access to international engine manufacturing facilities highlights the advantages of having a diversified global supply chain. Plants in Thailand, Poland, the United States, and Japan offer a lifeline, allowing the company to continue production despite domestic setbacks. This strategy reflects a broader trend in the automotive industry, where flexibility and supply chain resilience are increasingly vital for maintaining operations under adverse conditions.

By importing engines, Toyota not only seeks to keep production lines running but also demonstrates the company’s capacity to adapt to emergencies. This strategic flexibility could serve as a benchmark for other manufacturers facing similar disruptions, emphasizing the importance of preparedness and international coordination in sustaining car production in Brazil.

Delays in New Model Launches

The disaster has also affected the planned launch of new models. Specifically, the national debut of the Yaris Cross has been postponed due to the engine shortage. This delay impacts marketing campaigns, dealer inventories, and consumer expectations. By sourcing engines internationally, Toyota aims to minimize these delays and ensure that its lineup remains competitive in the Brazilian market.

The situation also underscores the interdependence of production facilities. While Porto Feliz is focused on engine manufacturing, its disruption directly affects assembly plants and the introduction of new products. The ability to resume car production in Brazil depends on quickly addressing these interlinked supply challenges.

Commitment to Sustainability and Resilience

Toyota has long emphasized sustainability and operational resilience. The current crisis is a reminder of the growing impact of extreme weather events on industrial operations. The automaker’s efforts to resume production while protecting its workforce align with these principles, ensuring that social, economic, and environmental factors are all considered in decision-making.

Furthermore, the company’s commitment to exploring emergency alternatives, such as engine imports, shows a proactive approach to maintaining continuity. This balance between operational necessity and responsibility to employees demonstrates Toyota’s dedication to sustainable practices in the automotive sector.

Looking Ahead: Recovery and Restart Plans

While the Porto Feliz plant is unlikely to resume full operations before 2026, Toyota is actively working on a path forward. By exploring engine imports and collaborating closely with unions, the company aims to minimize production gaps, sustain employment, and preserve its market share in Brazil.

The situation is a clear reminder that car production in Brazil depends not only on domestic infrastructure but also on robust contingency plans. Manufacturers must be prepared to address unforeseen challenges to maintain supply, protect jobs, and meet consumer demand.

Conclusion

The severe storm that damaged Toyota’s Porto Feliz plant has created a significant challenge for the automaker and Brazil’s automotive sector. With engine production halted, the company faces the prospect of months-long disruptions. However, by considering the importation of engines from overseas, Toyota is taking proactive steps to ensure that car production in Brazil continues, safeguarding jobs and stabilizing supply chains.

Toyota’s approach highlights the importance of global supply networks, workforce protection, and strategic planning in maintaining industrial resilience. While the road to full recovery may be long, the company’s commitment to its employees, customers, and the Brazilian market demonstrates a strong and responsible response to an unprecedented

Peru has taken a decisive step to boost competitiveness and attract domestic and foreign investment by creating new special economic zones. With the publication of Law No. 32449, the country officially launches a new framework for Private Special Economic Zones (ZEEP), offering a unique combination of tax and customs benefits that aim to stimulate industrial development, innovation, and export diversification. The initiative, approved by the insistence of the Congress of the Republic, represents one of the most ambitious economic modernization measures of recent years. By providing 0% income tax for the first five years and a gradual tax structure thereafter, the law seeks to position Peru as a regional hub for manufacturing, technology, and service exports.

A Strategic Framework to Boost Competitiveness

Law No. 32449 establishes a special tax and customs regime for the newly created special economic zones in Peru, granting benefits for up to 25 years. The goal is to create competitive environments that attract private capital, foster technological innovation, and stimulate job creation across all regions of the country. According to the regulation, the purpose of the law is to enhance national competitiveness by promoting industrial activities with added value, encouraging scientific research and technological development (R&D), generating quality employment, and strengthening non-traditional exports and services. This legal framework is designed not only to make Peru more attractive to investors but also to reduce regional disparities by enabling economic growth outside of Lima and other major urban centers. Each ZEEP will serve as a catalyst for industrial clustering, innovation, and export-driven production, helping integrate local economies into global value chains.

How the New Private Special Economic Zones Will Operate

Under the law, a private operator is defined as a private legal entity authorized to manage, promote, and develop one or more ZEEP. These operators will be responsible for overseeing the construction, administration, and overall functioning of the zones, ensuring compliance with regulations and promoting a business-friendly environment. The government’s strategy emphasizes private-sector participation. Unlike traditional free zones that rely heavily on public investment, these special economic zones in Peru will be privately developed and managed. This approach is expected to attract high-caliber investors with the capacity to build modern infrastructure, logistics hubs, and industrial facilities tailored to the needs of global markets. In addition, the zones will offer streamlined customs procedures, making it easier for companies to import machinery, raw materials, and components while maintaining competitive export conditions. The integration of customs and tax incentives will reduce operational costs and enhance supply chain efficiency—key elements for companies seeking to establish a foothold in Latin America.

Tax Benefits for Investors

One of the most attractive elements of Law No. 32449 is its favorable tax treatment. Operators and users of the zones will enjoy a 0% income tax rate during their first five years of operation, provided they meet the authorization and compliance requirements. After the initial five-year period, the tax rates will gradually increase as follows: 7.5% from the sixth to the tenth year, 10% from the eleventh to the fifteenth year, 12.5% from the sixteenth to the twentieth year, and 15% from the twenty-first to the twenty-fifth year. Even at their peak, these rates remain far below Peru’s general corporate income tax rate of 29.5%, representing a significant competitive advantage. This structure ensures that early investors benefit from substantial tax relief while maintaining long-term fiscal sustainability. However, not all industries are eligible. The law specifically excludes financial, accounting, and legal services; extractive activities such as mining and fishing; leasing, insurance, and the exploitation of intellectual property rights. This limitation ensures that the benefits are directed toward sectors that generate added value and employment rather than speculative or extractive activities.

Geographic and Sectoral Scope

While the law declares it a matter of national interest to create at least one ZEEP in each department of the country, it also makes clear that each zone must be created through a law or regulation with equivalent legal authority. This ensures a controlled expansion process aligned with regional economic priorities and infrastructure readiness. Importantly, the new regime does not apply to the existing special development zones located in Ilo, Paita, Matarani, Cajamarca, Chimbote, Tumbes, and Loreto, nor to the Special Economic Zone of Puno or the Free Trade Zone of Tacna. These will continue operating under their current frameworks, maintaining stability for ongoing projects while allowing new initiatives to take shape under the updated legislation. This dual-track approach reflects the government’s intention to modernize its investment promotion tools while preserving the continuity of previous economic policies. Over time, the coexistence of both regimes could allow for valuable comparisons and best-practice sharing across zones.

Potential Impact on Investment and Regional Development

The introduction of special economic zones in Peru marks a turning point for the nation’s industrial and export strategy. By combining tax exemptions, flexible customs regimes, and private management models, the country aims to attract investors in manufacturing, logistics, technology, and renewable energy. These zones are expected to create clusters of innovation where companies can benefit from shared infrastructure, skilled labor, and access to both domestic and international markets. The emphasis on R&D and technological development could also encourage partnerships between industry and academia, leading to knowledge transfer and higher productivity. From a regional perspective, the law supports decentralization by encouraging investment outside the capital. Departments such as Arequipa, Piura, and La Libertad, which already possess strong industrial bases and port connectivity, are likely candidates for early ZEEP implementation. Over time, other regions could follow suit, leveraging local strengths in agriculture, textiles, and manufacturing.

A Vision for Sustainable Growth

The new special economic zones in Peru are not merely a tax incentive tool—they represent a broader vision for sustainable and inclusive economic growth. By promoting private-led development and focusing on high-value-added activities, Peru aims to diversify its production base and reduce its reliance on raw material exports. Moreover, the 25-year benefit horizon provides long-term stability, giving investors the confidence needed to commit to large-scale projects. Combined with Peru’s network of free trade agreements and improving logistics infrastructure, the country is well-positioned to become a leading destination for global firms seeking to expand operations in South America.

Conclusion

Law No. 32449 signals Peru’s determination to enhance its competitiveness and attract quality investment through innovation and private participation. The establishment of new special economic zones in Peru with 0% income tax during the first five years, followed by a gradual rate increase, positions the country as one of the most investor-friendly destinations in the region. If effectively implemented, these zones could usher in a new era of industrial development, technological advancement, and regional integration—laying the groundwork for a more diversified, resilient, and dynamic Peruvian economy.

Top of Form

With an almost limitless potential, the region is poised to become a major energy supplier for the technology industry. The rise of artificial intelligence (AI) across all areas of human activity has brought with it an unprecedented increase in energy consumption, setting new benchmarks for electricity production to meet the growing demand of the ever-expanding network of data centers that sustain this technology.

According to estimates from the International Energy Agency (IEA), data processing centers currently account for 2% of global electricity consumption—about 536 terawatt-hours (TWh)—a percentage that will continue to grow as AI applications expand into new areas of daily life and as consumers spend more time using AI-powered devices.

In fact, consulting firm Deloitte forecasts that by 2026, AI data centers will consume 90 TWh per year—approximately one-seventh of the total energy projected for global data center infrastructure, which by 2030 could reach between 1,000 and 1,300 TWh. This scenario highlights one of the most important opportunities for Central America, as the region’s renewable energy potential becomes crucial—especially given its leadership in renewable generation worldwide. The challenge now lies in developing the necessary infrastructure to become a reliable and preferred energy supplier for the generative AI industry.

Initial Steps

According to the Latin American Energy Organization (OLADE) global ranking of renewable electricity generation, among the 20 countries with the highest share of renewables in electricity production, seven are from Central America: Costa Rica (the only country, alongside Paraguay, producing 100% renewable energy), El Salvador (84%), Panama (84%), Belize (76%), Nicaragua (74%), and Guatemala (71%).

While hydropower remains the dominant source of electricity generation in all these nations, other renewable sources are gaining ground. Costa Rica stands out, with 24% of its generation derived from wind and geothermal sources—an approach now being replicated by neighboring countries.

The region has made important strides toward consolidating its energy industry, including initiatives such as the Electric Interconnection System of Central American Countries (SIEPAC), which links national power grids; the Regional Operating Entity (EOR), which manages and operates energy transactions across borders; and the Regional Electricity Market (MER), which facilitates the buying and selling of power. Additionally, the region aims to coordinate national expansion strategies within a unified regional framework.

“These initiatives lay the groundwork for clean energy supply contracts that ensure the reliability required by data centers and AI operations,” explains Cindy Arrivillaga, director of banking and finance at the Guatemala office of the multinational law firm Arias. These developments highlight one of the strongest opportunities for Central America—to strengthen its position as a trusted provider of clean, high-capacity energy to the global technology ecosystem.

Preparing the Ground

However, despite its undeniable potential, Central America still faces significant challenges that must be overcome to achieve the goal of becoming a major energy production hub capable of meeting the demands of generative AI.

Diego Gallegos, a partner at Arias – Costa Rica, believes the objective is achievable, but only as a medium- to long-term process. “It requires sustained investment in infrastructure, modernization of the regulatory framework, and political and social backing at every stage of transformation. Costa Rica already has the foundation thanks to its renewable energy tradition, but to meet global demands, it must continue expanding,” he says.

Building new wind, solar, and geothermal power plants; modernizing transmission networks to ensure stable and uninterrupted supply; and strengthening regional interconnections to expand energy exchange and backup capacity are all essential actions. These strategies reflect key opportunities for Central America, particularly in positioning itself as a renewable energy hub supporting AI infrastructure.

“If these interconnections are reinforced and exportable surpluses generated, the region could advance toward that goal—although it must always be complemented by firm energy sources that guarantee supply stability,” adds Missuly Clark, senior associate at Arias – Panama.

The Necessary Framework

A crucial aspect of consolidating Central America as a secure energy supplier to the technology industry is the establishment of a robust regulatory framework. Several countries in the region have already adapted their laws to cover all aspects—from generation to distribution and interconnection—ensuring stable energy transfers across borders.

Costa Rica, a global pioneer in renewable energy and a Central American leader in the technology industry, has developed a strong legal framework led by the Law Authorizing Autonomous or Parallel Electricity Generation, the Law on Rational Energy Use Regulation, and Law 10.086 on the Promotion and Regulation of Distributed Energy Resources from Renewable Sources.

“Despite this framework, there are still opportunities to enhance the country’s energy development. New legislation should promote investment through tax incentives, regulate energy storage integration, modernize the grid to support bidirectional flows, and, above all, simplify bureaucratic procedures,” notes Gallegos. His remarks highlight another area of opportunities for Central America—to strengthen legal and regulatory alignment to attract sustainable investment and technological infrastructure.

Panama, one of the first nations in the region to embrace renewable energy, enacted Law 45 (2004) to promote investment in new renewable sources (solar, wind, geothermal, and biomass) and Law 44 (2011) establishing a special regime for wind farms. However, Clark believes there are still areas for improvement, such as the need for specific regulations on energy storage and sustainable data center operations involving AI.

“The creation of a framework linking energy efficiency, green certification, and investment attraction in digital infrastructure will be essential for positioning the country in this new scenario. Likewise, regional integration for exporting surpluses must be reinforced through clear rules that facilitate Central American electricity trade,” she explains.

Honduras, which enacted the Law for the Promotion of Electricity Generation from Renewable Resources in 2007 and amended it in 2013 to attract renewable investments, strengthened the initiative further with the 2014 General Law of the Electricity Industry, eliminating the monopoly of the National Electric Power Company (ENEE). However, the reform was reversed in 2022 through Decree 46-2022, which redefined electricity service as a public good and matter of national security.

“In general terms, Honduras has a relatively comprehensive legal framework to regulate the energy sector. The challenge lies in ensuring that regulatory entities enforce these laws clearly, coherently, and realistically, based on the state’s capacity to guarantee power supply,” says Mario Agüero, partner at Arias – Honduras. His assessment underscores the ongoing opportunities for Central America to strengthen governance, legal certainty, and energy management systems to meet global AI power needs.

In summary, the combination of abundant renewable resources, advancing interconnection systems, and growing institutional experience presents significant opportunities for Central America to emerge as a critical clean energy provider for the world’s AI-driven economy—if it can overcome infrastructural, regulatory, and political challenges with a long-term vision and regional cooperation.