In recent years, the economic ties between Canada and Mexico have deepened significantly, with Canadian investment in Mexico reaching new heights. Public announcements of Canadian investment in Mexico have accumulated expectations of $2.369 billion, which would generate 6,630 new jobs, according to Alejandro Encinas, Undersecretary of Foreign Trade at the Ministry of Economy (SE). Encinas made this statement on Thursday during the inauguration of the Mexico-Canada business forum ‘CanCham Day 2024′ in Mexico City, emphasizing the growing importance of this bilateral relationship.

Encinas detailed that from 2023 until July 2024, 21 public announcements have been made by Canadian companies, contributing significantly to Canadian investment in Mexico. This surge reflects Canada’s growing confidence in the Mexican market and the strategic benefits of closer economic integration within North America. “Not all investments are necessarily accounted for, as not all companies make public investment announcements,” Encinas clarified. “However, the Ministry of Economy closely monitors these announcements, which allows us to understand where Canadian investment in Mexico is heading and at what pace it will arrive in the coming years.”

The Role of Nearshoring in Canadian Investment

One of the critical factors driving the increase in Canadian investment in Mexico is the trend of supply chain relocation, also known as ‘nearshoring.’ This strategy involves moving production closer to consumer markets, and Mexico, with its proximity to the United States and Canada, has become an attractive destination for this trend. Encinas pointed out that there has been “a greater territorial distribution of these investments, not only focused on the mining sector but also on the food sector.” The diversity of investments highlights the multifaceted nature of Canadian interest in Mexico.

“For instance, Tim Hortons is preparing its expansion throughout Mexico, and we are also seeing important industries for North America, such as auto parts, expanding their presence in Mexico,” Encinas noted. The entry of iconic Canadian brands like Tim Hortons signifies the broader impact of Canadian investment in Mexico, as these companies bring with them not just capital but also expertise, job creation, and a cultural exchange that benefits both nations.

Expanding industries like auto parts is crucial for integrating North American supply chains. These sectors are vital for maintaining the competitiveness of North American manufacturing on the global stage. Encinas also indicated that when analyzing ‘nearshoring’ data, “the key players are not new investments or new companies, but rather companies that have been in Mexico for several years.” This suggests that established Canadian companies in Mexico are doubling their investments, recognizing the long-term benefits of operating there.

Strengthening Bilateral Trade

The robust economic relationship between Canada and Mexico extends beyond direct investment. Encinas highlighted that Canada is Mexico’s third-largest trading partner, with trade between the two countries reaching record figures last year. In 2023, the trade between Mexico and Canada amounted to $31.131 billion, representing an average of $3.6 million in trade per hour. “Compared to 2022, trade between Mexico and Canada increased by 8%,” Encinas stated, underscoring the dynamic nature of this partnership.

Mexico’s exports to Canada are a significant component of this trade relationship. Canada is the second-largest destination for Mexican exports, valued at $18 billion in 2023. Encinas says these exports are “mainly concentrated in the top five industrial productive sectors: automotive and auto parts, mechanical appliances, electronic equipment, agribusiness, and real estate. ” The automotive industry, in particular, has been a cornerstone of Mexico’s export strategy, with Canadian investments in auto parts manufacturing playing a crucial role in this success.

The integration of these sectors across North America is facilitated by the United States-Mexico-Canada Agreement (USMCA), which has provided a stable framework for trade and investment since its implementation. The agreement has encouraged companies to view North America as a single economic region, fostering closer ties between Canada and Mexico.

Canadian Investment and Economic Diversification

While the automotive sector remains a dominant force in Canadian investment in Mexico, there is a noticeable trend toward diversification. Encinas noted that the traditional focus on mining, a significant area of Canadian investment in Mexico, is now complemented by investments in other sectors such as food and beverage, technology, and services. This diversification is crucial for Mexico’s economic resilience, as it reduces reliance on any single industry and creates a more balanced economic landscape.

The entry of Canadian companies into the food and beverage sector, exemplified by Tim Hortons’ expansion, highlights the growing consumer market in Mexico. As the Mexican middle class expands, demand for a wider variety of goods and services increases, creating opportunities for Canadian businesses. Moreover, Canadian investments in technology and services are helping to modernize Mexico’s economy, introducing innovations that improve productivity and competitiveness.

Future Prospects for Canadian Investment in Mexico

Looking ahead, the future of Canadian investment in Mexico appears bright. Encinas mentioned that direct foreign investment from Canada in Mexico reached $3.49 billion in 2023, and in the first half of 2024 alone, Canadian investment in Mexico amounted to $2.408 billion. These figures indicate a sustained commitment from Canadian businesses to the Mexican market, driven by the advantages of geographic proximity, a favorable trade environment, and the growing opportunities in various sectors.

Encinas also emphasized Canada’s role as a major source of remittances and a significant contributor to Mexico’s foreign exchange earnings. Canada is the second-largest source of remittances to Mexico, which is crucial in supporting the livelihoods of millions of Mexican families. Additionally, Canada is the second-largest country of origin for tourists to Mexico, with popular destinations like Puerto Vallarta and Playa del Carmen attracting a growing number of Canadian visitors.

As Mexico prepares for a change in administration, with Claudia Sheinbaum set to become the new president on October 1, the continuity of policies that encourage foreign investment will be critical. Encinas hinted at the potential for expanding health or geriatric tourism, areas where Canadian investment could play a significant role. With an aging population in Canada, the demand for affordable, high-quality healthcare services in Mexico could open new avenues for Canadian-Mexican cooperation.

Conclusion

In conclusion, the growing Canadian investment in Mexico is a testament to the strong economic ties between the two nations. With $2.369 billion in announced investments and a potential to create over 6,000 jobs, Canadian businesses are not only contributing to Mexico’s economic development. Still, they also benefit from the opportunities presented by Mexico’s strategic location and dynamic market. As both countries continue to deepen their economic integration, the partnership between Canada and Mexico is set to play an increasingly important role in the broader North American economy.

In recent years, Ecuador has increasingly become a focal point for international franchises seeking to expand their global footprint. The country’s strategic location in South America and its expanding consumer market have made it an appealing destination for well-known European and American brands. The unique benefits these international franchises bring, such as their diverse offerings in sectors like clothing, food, and beverages, have not only transformed the retail landscape but also stimulated local economies through various means.

Strategic Alliances with Local Businesses

One of the most noteworthy aspects of this trend is how these franchises integrate into the local economy with the help of local businesses. Many companies forge strategic alliances with local businesses upon entering the Ecuadorian market. These partnerships are often centered around creating a robust production chain directly benefiting local suppliers, particularly those providing raw materials. This collaboration ensures that the economic benefits of foreign investment are felt not only by the consumers who enjoy new products and services but also by the local businesses that contribute to these supply chains.

The Economic Context: A Boost Amid Low FDI

The influx of foreign franchises in Ecuador, such as Starbucks, Krispy Kreme, and others, is particularly significant given the country’s current economic context. Ecuador has been experiencing a relatively low Foreign Direct Investment (FDI), which has raised concerns among policymakers and economists about the economy’s overall health. According to figures from the Central Bank of Ecuador (BCE), the country recorded a total FDI inflow of just USD 372 million in 2023, the lowest amount since 2011. This decline in FDI has been attributed to various factors, including global economic uncertainty, domestic political instability, and concerns about the country’s regulatory environment. However, the arrival of these foreign franchises in Ecuador provides a much-needed boost to the economy by injecting fresh capital, creating jobs, and generating foreign currency inflows.

Job Creation and Economic Dynamism

The employment opportunities generated by foreign franchises in Ecuador are multifaceted. On one hand, establishing physical retail outlets creates a range of permanent jobs, providing a stable job market. Positions such as store clerks, accountants, and administrators are essential to the day-to-day operations of these businesses. These roles provide stable employment for many Ecuadorians, reducing unemployment and underemployment rates in the country. On the other hand, setting up these franchises often involves significant construction activity and creating temporary jobs in the building, electrical work, and interior design sectors. While these construction jobs may be short-term, they provide a crucial source of income for workers and contribute to the overall dynamism of the economy.

Broader Economic Impact and Consumer Activity

The presence of international franchises also has a broader impact on the local economy. Opening new stores often attracts large crowds of curious consumers eager to experience the products and services offered by these global brands. This surge in consumer activity can lead to a ripple effect throughout the economy, as increased foot traffic in retail areas benefits not only the franchises themselves but also surrounding businesses, such as restaurants, cafes, and local retailers. The increased economic activity can also boost government revenues through sales taxes and other forms of taxation, which can be reinvested into public services and infrastructure.

Enhancing Ecuador’s Investment Attractiveness

However, while the arrival of foreign franchises is undoubtedly positive, it also underscores the need for Ecuador to take further steps to enhance its attractiveness as a destination for investment. According to economic experts, while these franchises contribute to the economy, the ultimate goal should be to attract long-term investments in industries that offer greater added value. One such industry is mining, which has already contributed significantly to Ecuador’s FDI. In 2023, the mining sector accounted for 43.8% of the country’s total FDI, demonstrating its potential as a catalyst for economic growth. Mining investments create long-term employment opportunities and drive the expansion of related industries, such as hospitality, food production, security services, and textiles.

Leveraging Competitive Advantages

To capitalize on this potential, experts suggest that Ecuador must leverage its competitive advantages, particularly in terms of tax incentives and legal security. Investors carefully consider these factors when deciding where to allocate their capital, and even a small difference in tax rates or the perceived stability of the legal environment can be decisive. For instance, an investor might choose between Ecuador, Peru, or Colombia based on the relative attractiveness of each country’s tax regime. Therefore, Ecuador must strive to offer a compelling value proposition that differentiates it from its regional competitors.

The Role of Public-Private Partnerships

Another strategy that could bolster Ecuador’s appeal to investors is strengthening public-private partnerships. These collaborations allow private companies to invest in local industries with the government’s support, thereby sharing the risks and rewards of investment. Public-private partnerships can be particularly effective in sectors that require significant capital investment, such as infrastructure, energy, and manufacturing. By fostering an environment where private capital is welcomed and supported, Ecuador can create a more sustainable and diversified economic base that is less reliant on volatile sources of FDI.

Conclusion: Building a Sustainable Economic Future

In conclusion, while Ecuador has made significant strides in attracting foreign franchises, much work still needs to be done to realize its potential as a destination for investment fully. By focusing on long-term industrial investment, enhancing its tax and legal environment, and promoting public-private partnerships, Ecuador can build on its recent successes and lay the foundation for sustained economic growth in the years to come. The arrival of international franchises is a promising sign, but it should be seen as just one part of a broader strategy to ensure the country’s economic future.

The behavior of foreign investment in Mexico is on an upward trajectory, with a significant increase in FDI recorded in the first six months of 2024. Figures from the Ministry of Economy reveal that over $31 billion flowed into the country during this period, marking a 7% rise from 2023. This growth in foreign investment in Mexico, outpacing the overall economy, is a promising sign for the future pace of economic activity. Such a substantial influx of capital reflects international investors’ ongoing interest and confidence in the Mexican market. It remains one of the most attractive destinations for foreign investment in Latin America due to its strategic location, trade agreements, and competitive labor costs.

Sectoral Distribution of Foreign Investment in Mexico

The composition of this foreign investment is particularly noteworthy, as it underscores the sectors driving economic growth in Mexico. According to the Mexican Institute for Competitiveness (IMCO), 26% of the total foreign investment in Mexico is concentrated in manufacturing transportation equipment. This sector, encompassing the automotive and aerospace industries, has long been a pillar of Mexico’s economy, benefiting from the country’s proximity to the United States, skilled workforce, and well-established supply chains. A 22% increase in investment in this sector compared to the same period in 2023 highlights its resilience and the ongoing demand for Mexican-made transportation equipment.

Similarly, the beverage and tobacco industry has attracted 14% of the total FDI, a 76% increase from the previous year. This surge can be attributed to the solid domestic and international demand for Mexican beverages, particularly in the spirits and soft drinks segments, where brands have established a global presence. The mining sector, which accounts for 10% of the FDI, has seen an extraordinary 307% increase, reflecting the global demand for minerals and metals essential for various industries, including technology and renewable energy.

Additionally, 4% of the foreign direct investment in Mexico is directed toward the chemical industry, which is critical in supplying raw materials for manufacturing processes across various sectors. The remaining investment is spread across other industries, further diversifying the economic base and reducing dependency on any single sector.

Anomalous Trends in FDI Composition

However, despite these positive developments, the composition of foreign investment in Mexico could be more stable and consistent with what is expected. Analyzing the period between 2006 and 2023, foreign investment in Mexico has traditionally been divided into three components: new investments, reinvestment of profits, and intercompany accounts. Historically, new investments have been a significant driver of FDI, averaging 55% between 2006 and 2013. This figure dropped to 30% between 2014 and 2022; in 2023, it fell further to 13%. Alarmingly, in the first half of 2024, only 1% of FDI was allocated to new investments, signaling a dramatic shift.

The reinvestment of profits has remained relatively stable, averaging 37% of total FDI. This stability suggests that existing companies are confident in Mexico’s economic environment and are reinvesting their earnings rather than repatriating them. However, the investment dynamics in intercompany accounts, which reflect the financial transactions between related entities in different countries, have shown a downward trend, from 25% at the beginning of the analysis period to 14% in 2023. This year, the percentage is zero, indicating that 97% of the $31 billion is exclusively reinvestment of profits, with no new capital inflows from parent companies abroad.

Implications of Reinvestment Dominance

The dominance of reinvestment in foreign direct investment in Mexico has both positive and negative implications. On the positive side, companies’ reinvestment of profits speaks well of their financial discipline and the dynamics of the domestic market. It reflects the confidence of established investors in the stability and potential of the Mexican economy. Companies are choosing to reinvest their earnings in Mexico, which can lead to business expansion, job creation, and increased economic activity.

However, the sharp decline in new investments is concerning. The lack of new investments indicates that no new national or foreign companies are being created, limiting the infusion of fresh capital, technology, and innovation into the economy. This stagnation in new ventures could hinder the country’s long-term growth prospects, particularly in the context of global trends like nearshoring, where Mexico has significant potential but appears to be underperforming. Despite favorable economic conditions and government incentives to attract new investments, the expected influx of new companies has yet to materialize. This could be due to various factors, including insecurity, changes in administrations in Mexico and the United States, and legal uncertainty, which may deter new entrants.

Conclusion: Balancing FDI Growth and Structural Shifts

The evolving landscape of foreign investment in Mexico presents promising and concerning trends. On the one hand, the robust growth in FDI, particularly within critical sectors like transportation equipment manufacturing, beverages, tobacco, and mining, indicates a robust economic momentum that could bolster Mexico’s economic activity in the near term. The substantial increase in reinvestment of profits reflects confidence among existing investors in the country’s economic stability and market potential.

On the other hand, the sharp decline in new investments and the complete absence of intercompany accounts signify a worrying structural shift. The lack of new investments suggests that Mexico may not be as attractive to new ventures or foreign companies as it once was, despite favorable economic conditions and government incentives. This could hinder the country’s long-term growth prospects, particularly in light of the global nearshoring trend. Mexico has the potential to become a significant hub but needs to capitalize on this opportunity entirely.

To reverse this trend and ensure sustainable economic growth, policymakers must carefully analyze the underlying factors driving these shifts. Addressing legal uncertainty, political changes, and security concerns will restore investor confidence and attract new investments. As Mexico approaches the end of the year, the government must implement strategies to attract new investments while maintaining the confidence of existing investors. Only through a balanced and proactive approach can Mexico ensure sustainable economic growth and fully capitalize on its strategic advantages in the global market.

Foreign investment in Eastern Antioquia, Colombia, continues to grow due to the region’s strategic location and expanding infrastructure. More than two hundred million dollars have flowed into this subregion, strategically located near the José María Córdova International Airport and the Rionegro Free Trade Zone. This development has turned it into a strategic hub for enhancing the international competitiveness of Antioquia and the country. Its natural beauty and economic potential have made it a magnet for foreign investment in Eastern Antioquia, Colombia. The José María Córdova International Airport (JMC) and the Rionegro Free Trade Zone are critical to its competitiveness.

Extensive connectivity

The airport offers connectivity to twelve national destinations, including Bogotá, Cali, and Barranquilla, as well as twenty direct international destinations, such as Madrid (Spain), New York, Miami, Mexico City, Panama City, Lima, Buenos Aires, and Santiago de Chile. In less than 6 hours, travelers can connect with the major business capitals of the continent, further driving foreign investment in Eastern Antioquia, Colombia.

“The current conditions create promising scenarios for investment projects that impact the local economy, such as the adaptation of agricultural technology, opportunities in the consolidation of the aerospace sector, and potential developments in pharmaceutical and healthcare products and services,” commented Paola Caballeros, Executive Director of the Invest In Oriente Antioqueño Agency, who added that the agency arrived in the territory with the firm conviction of connecting the Eastern Antioquia subregion with national and international opportunities. The region has experienced a notable increase in strategic foreign investment in Eastern Antioquia, Colombia, close to two hundred million dollars, with high growth potential. In the tourism sector, the arrival of the Marriott International chain in Guatapé, with the future conversion of The Brown Hotel to its Autograph Collection brand in the reservoir area, demonstrates the region’s growing appeal as a top-tier destination.

In the agribusiness sector, world-renowned companies like Pepsico have found an ideal environment for their development and expansion in Guarne, with an investment of ninety million dollars. Likewise, the aviation sector has seen significant growth with the implementation of Avianca’s MRO (Avianca Aeronautical Maintenance Center in Rionegro), which has strengthened the sector’s technical and operational capacity.

VaxThera, a SURA company, will establish the country’s first human vaccine production plant, which will begin operations in 2025; and Life Factors, specialized in the development and production of blood-derived medications, aims to consolidate the region as a leader in biotechnological research and development. According to Caballero, the Rionegro Free Trade Zone provides a favorable environment for companies seeking tax and logistical advantages. “The proximity to Medellín, just 30 minutes by car, adds strategic value, making Eastern Antioquia an attractive investment and business development option. Additionally, with the future port operation in Puerto Antioquia, in Urabá, our region is strategically positioned, equidistant from the country’s main consumption centers and the new port, which will further enhance our competitiveness,” she noted, reinforcing the role of foreign investment in Eastern Antioquia, Colombia.

The progress in the East is partly due to robust institutions that have been fundamental to growth and innovation. Entities such as the Eastern Antioquia Chamber of Commerce, the Regional Autonomous Corporation of the Cuencas de los Ríos Negro y Nare (Cornare), and the CEO Business Guild, along with universities such as the Universidad Católica de Oriente, EAFIT, and the Universidad de Antioquia, and strategic allies like Asocolflores, Comfama, and Comfenalco, have facilitated effective collaboration between the public and private sectors, driving sustainable progress in the territory. “These institutions have been key in promoting clusters and the regional brand ‘Eastern Antioquia, a region that enchants,’ positioning the region as an attractive destination for investment, tourism, and sustainability,” stated Caballero.

For Camila Escobar, President of the Eastern Antioquia Chamber of Commerce, the region is consolidating as a benchmark for development and competitiveness in the country, thanks to its natural and strategic advantages. “With landscapes, biodiversity, water, and energy resources, and a privileged location with the airport and key road connections, foreign investment in Eastern Antioquia, Colombia, is likely to continue to grow,” she emphasized.

The Eastern Antioquia Chamber of Commerce has led key initiatives such as clusters for avocado, flowers, tourism, dairy, and technology, promoting competitiveness and innovation in these sectors. It plans to boost the life sciences cluster. These initiatives demonstrate the commitment of local institutions to fostering a vibrant and sustainable business and community environment.

Business Innovation in Eastern Antioquia

Among the most notable projects in this Antioquia region are ZONA E and the expansion of the San Nicolás Shopping Center. ZONA E is a significant real estate project offering corporate spaces for commercial, light industry, and hotel operations, with lots ready for construction and fully equipped with all necessary services and permits, allowing projects to start immediately. It is strategically located in Llanogrande, one of the rural areas of Rionegro, where some of the most luxurious properties in the country are found. According to the director of Invest in Oriente, multinationals like the Japanese company YKK have recognized ZONA E as “the ideal place for operational expansion, as it fosters growth and business innovation, ensures vital connections, and provides a dynamic environment for business.” The project is just 10 minutes from José María Córdova Airport, 30 minutes from Medellín via the Eastern Tunnel, and 5 minutes from the main shopping centers, service areas, banks, and other amenities. ZONA E has also established itself as a regional reference point for hosting high-profile corporate and social events. This project has further solidified the impact of foreign investment in Eastern Antioquia, Colombia.

Meanwhile, the San Nicolás Shopping Center, with 17 years of experience, is another pillar of commercial development in the region. It drives the retail sector and offers a wide range of services, dining, and entertainment in the territory. With the projected expansion for 2024 and 2025, it will become the most important commercial complex in Eastern Antioquia, comprising over 310 brands in a Gross Leasable Area (GLA) of 57,000 m² of commercial space. It will also include a devoted area for events and an auditorium.

The strategic location, commitment to sustainability, green areas, and additional services such as coworking, dog place, lactation area, outdoor gym, inclusive playgrounds, children’s area, and other spaces for visitors make San Nicolás the meeting point for families in Eastern Antioquia.

Both projects demonstrate the region’s ability to attract investment and develop infrastructure that drives the local economy.

A Growing Subregion

In the last 17 years, Eastern Antioquia has grown as if the population of La Estrella and Sabaneta had moved to the region, positioning it as the primary demographic and productive engine for the future metropolis of Medellín in 2050.

The scarcity of land in Medellín has also driven strong urban growth in the East, which in 2023 accounted for 24.9% of the 424 housing projects in Antioquia, according to the Colombian Chamber of Construction (Camacol). Rionegro, El Retiro, and La Ceja lead this activity, while Medellín ranks second with 21.7%, followed by Bello, Envigado, and Sabaneta.

Between 2017 and 2019, new home sales in the East exceeded 2,000 units annually. Rionegro leads this trend with a 54% share. Although they fell to 1,829 units in 2020, the market expects to surpass 2,000 in 2024 after a strong recovery in 2021 and 2022.

The urbanization growth in the East has shifted from selling recreational farms 15 years ago to building housing developments over the past decade, establishing the region as a high-demand residential and rural destination, especially in Guarne, El Retiro, La Ceja, and El Carmen. The increased housing development is also an indirect result of foreign investment in Eastern Antioquia, Colombia.

According to Eduardo Loaiza, manager of Camacol Antioquia, the San Nicolás Valley is now the epicenter of development in the region, surpassing the Aburrá Valley due to its temperate and green environment. “The East offers residential areas in natural settings, contrasting with the single-family homes of the Aburrá Valley,” explained Loaiza.

Rionegro, the principal municipality of the plateau, has driven transformation with the construction of the Eastern Tunnel, which has reduced travel time to Medellín. “This has increased housing demand, with sales rising from 400-500 units annually 12 years ago to more than 6,000 in recent years,” added the manager of Camacol Antioquia.

Investments in infrastructure, such as the integration of Empresas Públicas de Medellín and the airport’s growth, have also driven the East’s development. “The pandemic increased demand for open spaces, consolidating the region’s appeal,” noted Loaiza.

Development Figures

The GDP of the East grew by 174% in 11 years, with sustained growth in added value production exceeding 10%, according to the Eastern Antioquia Chamber of Commerce. The services sector leads this trend, followed by industry and agriculture. “Between 2016 and 2022, the East grew by 10.1% annually, establishing itself as the second most competitive region in Antioquia,” said Camila Escobar, executive president of the entity.

The formal employment rate in the East also reaches 41% in rural areas and 56.5% in urban areas, with municipalities such as La Ceja and Rionegro exceeding 60%, reflecting a robust labor market with opportunities in the region.

A combination of strategic location, growing infrastructure, and a clear focus on foreign investment drives this vibrant economy in Eastern Antioquia, Colombia.

Eastern Antioquia, Colombia, has become a prime destination for foreign investment due to its strategic location, expanding infrastructure, and vibrant economy. With over $200 million in foreign investment, the region benefits from its proximity to the José María Córdova International Airport and the Rionegro Free Trade Zone, enhancing its international competitiveness. Key sectors attracting investment include tourism, agribusiness, aviation, and biotechnology. Major projects like ZONA E, the San Nicolás Shopping Center expansion, and the establishment of Colombia’s first human vaccine production plant underscore the region’s potential. Robust institutions, collaborative public-private initiatives, and sustainable growth have further solidified Eastern Antioquia as a critical hub for development in Colombia.

At the end of July this year, Paraguay joined the exclusive group of South American countries with an investment-grade rating after Moody’s assigned the country a credit rating of Baa3 with a stable outlook. With this inclusion, Paraguay becomes the fifth country in the region to achieve this level, alongside Chile, Peru, Uruguay, and Colombia.

Obtaining “investment grade” improves international perception of the Paraguayan economy and will significantly boost foreign investment in South America in the coming years. Additionally, this rating helps maintain solid and sustained economic growth.

CHILE

The results of the countries in the region with investment-grade ratings reinforce the importance of this category. A standout example is Chile, which, since achieving this rating in the early 1990s, has attracted more than USD 307.2 billion in foreign investment in South America, according to data from the Economic Commission for Latin America and the Caribbean (ECLAC).

Breaking down the figures, between 1991 and 1995, Chile accumulated USD 1.667 billion in foreign investments, which increased to USD 5.667 billion between 1996 and 2000. Later, between 2003 and 2007, investments totaled more than USD 39 billion, with an annual average of USD 7.8 million.

The period from 2008 to 2012 marked a notable increase, reaching USD 105 billion, with an average of USD 21 billion per year. Between 2013 and 2017, the figure moderated to USD 85 billion, representing an annual average of USD 17 billion.

Finally, between 2018 and 2022, investments totaled USD 55 billion. It is worth noting that in 2023 alone, Chile attracted more than USD 21 billion in foreign investment in South America in a single year.

On the other hand, it is worth mentioning that in June 2024, Moody’s decided to maintain Chile’s rating at A2 with a stable outlook, supported by the country’s institutional strength, governance, and solid fiscal position. For its part, S&P assigned Chile a rating of A with a negative outlook, while Fitch maintained a rating of A- with a stable outlook.

PERU

Peru, for its part, achieved investment-grade status in 2008. Since then, in more than 15 years, the country has received over USD 82 billion in foreign investment in South America, according to ECLAC.

Breaking down the figures, between 2008 and 2012, Peru accumulated more than USD 43 billion in investments, with an annual average of USD 8 billion. Between 2013 and 2017, investments totaled more than USD 35 billion, which equates to an annual average of USD 7.1 million.

Between 2018 and 2022, foreign investment reached approximately USD 34 billion, with an annual average of USD 6.8 million. Finally, in 2023, Peru attracted more than USD 3.9 billion in a single year.

Regarding Peru’s current rating, in April 2024, S&P downgraded its sovereign rating from BBB to BBB-, maintaining a stable outlook. This decision was motivated by the growing political uncertainty in the country, marked by the tense relationship between the executive and legislative branches.

For its part, Moody’s maintains Peru’s rating at Baa1, while Fitch rates it at BBB, both with negative outlooks.

COLOMBIA

Colombia regained its investment-grade rating in 2011, and since then, in more than 12 years, it has accumulated over USD 178 billion in foreign investment in South America.

Breaking down the figures, between 2011 and 2015, Colombia attracted more than USD 73.79 billion in investments, with an annual average of USD 14.758 billion. Between 2016 and 2020, foreign investment revenues totaled more than USD 61.633 billion, representing an annual average of USD 12.3 billion.

ECLAC data shows that in the last three years, from 2021 to 2023, foreign investments in Colombia reached USD 43.8 billion, with an average of USD 14 billion per year.

Colombia has a rating of Baa2 with a stable outlook from Moody’s. S&P, for its part, assigned it a rating of BB+ with a negative outlook, while Fitch rated the country at BB+ with a stable outlook.

It is worth recalling that in January 2024, S&P changed the outlook from stable to negative, maintaining the rating at BB+ due to moderate economic growth expectations.

URUGUAY

Uruguay regained its investment-grade rating in 2012, and since then, in more than 12 years, it has attracted over USD 31.5 billion in foreign investment in South America.

Breaking down the figures, between 2012 and 2016, Uruguay accumulated more than USD 13.619 billion in investments, with an annual average of USD 2.7 billion. Between 2017 and 2021, foreign investments totaled more than USD 9.8 billion, which equates to an annual average of USD 1.96 billion.

In the last two years, from 2022 to 2023, foreign investments in Uruguay totaled USD 8 billion, although a decline was recorded last year, according to ECLAC data.

On the other hand, Uruguay has a rating of Baa1, which is a stable outlook from Moody’s. S&P, for its part, assigned it a rating of BB+ with a stable outlook, while Fitch rated the country at BBB with a stable outlook.

It is worth mentioning that in December 2023, the rating agency Moody’s confirmed Uruguay’s rating at Baa2, improving the outlook from stable to positive. However, in March 2024, Moody’s decided to upgrade the rating from Baa2 to Baa1, changing the outlook to stable. This decision was due to solid institutions supporting the implementation of structural reforms and the continued adherence to fiscal and monetary policies, pointing to higher sustained growth rates than in previous periods.

Thus, Paraguay’s now-investment-grade rating opens up a great opportunity to attract more foreign investments, as seen in countries like Chile, Peru, Colombia, and Uruguay.

Maintaining this rating can drive the country’s economic growth and strengthen international confidence. This improves Paraguay’s image in global markets and places it in a favorable position to receive investments that will help achieve more robust economic development in the coming years.

Paraguay’s achievement of an investment-grade rating marks a significant milestone in the nation’s economic journey, positioning it alongside regional peers such as Chile, Peru, Colombia, and Uruguay. The experiences of these countries demonstrate that maintaining such a rating can catalyze substantial foreign investment in South America, fostering long-term economic growth and stability. For Paraguay, this newfound status presents an opportunity to attract capital inflows that could bolster infrastructure, create jobs, and drive innovation, further solidifying its economic foundation. However, sustaining this rating will require a continued commitment to sound fiscal policies, political stability, and institutional reforms. By learning from the successes and challenges of its neighbors, Paraguay can leverage this moment to ensure a prosperous future, enhancing its role in the global economy and improving the lives of its citizens.

According to Costa Rica’s Ministry of Foreign Trade data, the agreement with the South American nation will provide access to a market of over 17 million potential consumers. Costa Rica’s Minister of Foreign Trade, Manuel Tovar Rivera, confirmed that the FTA between Costa Rica and Ecuador will be effective on October 1. Tovar stated in the Costa Rican Congress that he would travel to Quito, the Ecuadorian capital, at the beginning of September to exchange the ratification instruments with the authorities of that country. The Legislative Assembly approved this trade agreement on May 30 with a vote of 45 Congress members. The Executive Power signed it on June 19.

While some agricultural products, such as bananas and pineapples, dairy products, beef, pork, and chicken, were excluded from the agreement, the Costa Rican Chamber of Exporters (Cadexco) estimates that the FTA between Costa Rica and Ecuador could significantly boost Ecuador’s exports by US$35 million annually. This potential growth is a promising sign for the future of trade between the two nations.

The FTA between Costa Rica and Ecuador is not just a trade agreement but a significant milestone for the Costa Rican market. It opens up new opportunities and a larger consumer base, marking a new era of economic growth and prosperity.

In 2023, trade in goods with Ecuador reached US$110 million, of which 70% corresponded to exports and 30% to imports. Costa Rica’s main product exports to Ecuador are pharmaceuticals, which accounted for US$8.23 million between January and October 2021. Iron and steel scrap and electrical materials follow this.

Current Trade Landscape

The current trade relationship between Costa Rica and Ecuador is dynamic and evolving, reflecting the broader trends of regional integration and economic diversification in Latin America. While the total value of trade between the two countries is relatively modest compared to their trade with more significant partners, it has shown steady growth over the years. This growth is underpinned by a shared interest in enhancing economic cooperation and taking advantage of complementary industries, a testament to the strength of the trade relationship. The latest available data shows that the total trade value between Costa Rica and Ecuador hovers around $250 million annually. This figure includes imports and exports, with a slight trade surplus generally favoring Ecuador. Despite its size, this trade relationship is vital for both countries as they seek to diversify their trade partners and reduce dependence on traditional markets such as the United States and Europe.

Key Goods Exchanged

The FTA between Costa Rica and Ecuador facilitates the exchange of a mix of agricultural products, manufactured goods, and services, reflecting the diverse economies of both nations. Exports from Costa Rica to Ecuador primarily include medical devices, electronics, and food products. Costa Rica has developed a robust medical device manufacturing sector, making it a key exporter of such goods in the region. Additionally, Costa Rica exports coffee, sugar, and prepared foodstuffs, which are well-received in the Ecuadorian market due to their quality and competitive pricing.

Imports from Ecuador to Costa Rica are dominated by agricultural products, particularly bananas, flowers, and seafood. Ecuador is one of the world’s largest exporters of bananas, and this fruit constitutes a significant portion of its exports to Costa Rica. Shrimp and fish, particularly tuna, are key export items, taking advantage of Ecuador’s rich marine resources. Additionally, Ecuador exports manufactured goods, such as textiles and plastics, to Costa Rica.

Areas for Future Growth

While the trade relationship between Costa Rica and Ecuador is well-established, there is significant potential for growth in several key areas:

Agricultural Innovation and Biotechnology: Both countries have strong agricultural sectors and could benefit from increased collaboration in agricultural technology and biotechnology. Costa Rica’s expertise in sustainable agriculture and organic farming could complement Ecuador’s strength in traditional agriculture, leading to innovations that enhance productivity and sustainability in both countries.

Renewable Energy: With both countries committed to expanding their renewable energy sectors, there is significant potential for bilateral cooperation in this area. Costa Rica is known for its leadership in renewable energy, mainly hydroelectric, wind, and geothermal power, while Ecuador has considerable solar and wind energy potential. Joint ventures, technology exchanges, and investment in renewable energy infrastructure could be fruitful areas for future collaboration.

Tourism: Tourism is a critical sector for both economies, and there is potential for joint marketing initiatives, tourism infrastructure development, and eco-tourism projects that could benefit both countries. Leveraging Costa Rica’s reputation as a global leader in eco-tourism and Ecuador’s unique attractions, such as the Galápagos Islands, could help boost visitor numbers and revenues in both nations.

Digital Economy and Services: Expanding digital trade and services represents another area with significant potential. Both countries are working to develop their digital economies, and increased collaboration in areas such as e-commerce, digital payments, and IT services could create new opportunities for businesses and consumers alike.

In conclusion, the FTA between Costa Rica and Ecuador marks a significant milestone in the economic relationship between the two nations, opening doors to new opportunities and reinforcing their commitment to regional integration. As they prepare to implement this agreement, both countries stand to benefit from enhanced trade, diversified economic partnerships, and collaboration in critical sectors such as agriculture, renewable energy, tourism, and the digital economy. By capitalizing on their complementary strengths and shared vision for sustainable development, Costa Rica and Ecuador can build a stronger, more resilient bilateral relationship that will contribute to their long-term economic prosperity and regional influence.