Foreign direct investment (FDI) is transforming Latin America’s energy landscape, particularly in renewable energy projects across Brazil, Mexico, and Chile. An analysis spanning from 1990 to 2022 across 17 Latin American countries reveals that while FDI has significantly contributed to the development of renewable energy infrastructure, it has minimally improved environmental quality overall [25c44a50]. However, countries like Uruguay and Costa Rica have successfully seen reductions in their ecological footprints, showcasing the potential for positive environmental outcomes [25c44a50].
As the region grapples with the dual challenges of economic growth and environmental sustainability, the International Renewable Energy Agency (IRENA) emphasizes that investment levels in renewable energy must double by 2030 and triple thereafter to meet global climate targets [25c44a50]. Tailored strategies are essential for each country's unique energy market, indicating that a one-size-fits-all approach may not be effective [25c44a50]. Collaboration between public and private sectors is deemed crucial for fostering sustainable investment in the region's energy future [25c44a50].
Chinese investments in Latin America have also shifted towards decarbonization and renewable energies, reflecting China's changing priorities and the strategic importance of these technologies for the future of the global economy [1fa83522]. Since 2013, Chinese investments have increasingly targeted big infrastructure projects in the energy sector, particularly as part of the Belt and Road Initiative (BRI) [1fa83522]. This shift includes investments in strategic minerals and batteries in Chile and Argentina, as well as manufacturing capacity for electric vehicles and solar panels in Brazil [1fa83522].
Latin American countries are encouraged to leverage Chinese capital for their developmental processes by creating higher value-added goods and innovating their production [1fa83522]. However, this trend of Chinese investments also poses geopolitical tensions with the United States, which has its own interests in the region's energy resources [1fa83522].
The partnership between the United States and Colombia is noteworthy in the context of energy transition, climate action, health, trade, and investment [6138ce45]. Colombia aims to reduce greenhouse gas emissions and enhance renewable energy capacity, recognizing the importance of clean energy investment in job creation and opening new markets [6138ce45]. The U.S.-Colombia Trade Promotion Agreement has boosted bilateral trade and investment, but there remains untapped potential [6138ce45].
Meanwhile, Latin America is experiencing a rush in oil exploration, with at least 16 countries involved in about 50 major new oil and gas projects [2530a578]. Production in the region is expected to grow by 5.8 million barrels per day (mb/d) by 2028, with non-OPEC countries like Brazil, Guyana, Argentina, Ecuador, Mexico, and Suriname strengthening their foothold in the oil and gas market [2530a578]. Despite concerns about the impact on the climate crisis, these countries are betting on oil as a source of wealth and economic growth [2530a578]. However, experts warn that investing heavily in fossil fuels while global oil demand is declining could be a mistake for humanity's future [2530a578].
In 2023, FDI in Latin America remained almost stable at $193 billion, making it the least affected developing region amid a global investment decline, according to the UN Trade and Development annual report [ba0a991f]. Mexico and Brazil continued to attract significant foreign investments, while Chile emerged as an increasingly attractive destination. The stability in FDI flows underscores the region's attractiveness to foreign investors despite global economic uncertainties, particularly due to the demand for essential minerals and raw materials necessary for clean energy technologies [ba0a991f].
As Latin America navigates its energy future, the integration of green investments, strategic partnerships, and sustainable practices will be crucial in achieving a balance between economic growth and environmental protection.