From Investment Potential to Real Economic Impact

If there’s one thing Latin America and the Caribbean doesn’t lack, it’s investment potential. The region combines abundant natural resources and expanding renewable-energy capacity, along with strategic proximity to major trading partners and increasingly sophisticated productive ecosystems.

But potential alone is not enough. To boost productivity, accelerate growth, diversify exports and create quality jobs, our region needs to attract more foreign investment and make the most of it. Meeting this challenge requires not only attracting more investment, but also ensuring that it delivers greater development benefits.

Latin America and the Caribbean attracts more foreign direct investment (FDI) relative to the size of its economy than the other regions analyzed in our upcoming Trade and Integration Monitor 2026. Yet its annual FDI inflows over the last three years averaged 4.5% below those of a decade earlier, and its share of the global stock of FDI fell from 7.1% to 6.0%. What matters now is less the region’s place on the global investment map than what that investment produces in our economies.

More Investment Is Needed, But so Is Investment that Drives Development

Higher investment flows are welcome, but their true value lies in what happens next: whether investment creates new productive capacity, strengthens local firms, supports higher-value activities, transfers knowledge and technology, diversifies economies, and generates quality jobs. 

That means countries need to focus not only on how much investment they attract, but also on its quality, reach and development impact. For too long, investment promotion and investment facilitation have often been treated as separate agendas. In practice, they are two parts of the same equation.

Investment promotion helps countries communicate their opportunities and attract investors, but it is evolving. Showcasing a country is no longer enough: agencies need to offer solutions, build trust and show they can deliver. Facilitation helps ensure that, once investors are interested, they can find clear information, predictable rules, efficient procedures and institutions that coordinate and respond to their needs. 

It is about much more than cutting red tape or launching a new digital portal: digitalization and simpler regulations matter, but lasting results also require clear responsibilities, sustained political commitment and real engagement with the private sector.

The work doesn't stop once an investment is established. Governments need to think about the entire investor journey, from attraction and establishment to aftercare, retention, expansion and integration into the local economy.

That is particularly important because successful facilitation is about much more than cutting bureaucratic hurdles or introducing a new digital platform. Digitalization and regulatory simplification matter, but lasting results also require capable institutions, explicit mandates, coordination across government, sustained political commitment and meaningful engagement with the private sector. The impact of investment is multiplied when companies grow, integrate into our economies, and create new opportunities for the economy and local workers.

The experience of recent years demonstrates the importance of this implementation agenda. Together with the World Trade Organization and the International Trade Centre, the IDB has supported eight countries, Ecuador, Guatemala, Honduras, Barbados, Jamaica, Guyana, Belize, and Suriname, in completing needs assessments for the Investment Facilitation for Development Agreement (IFDA) . These exercises have helped identify priorities and provide governments with a practical foundation for sequencing reforms and determining where technical assistance, institutional strengthening, digital solutions or financing can have the greatest impact.

Across countries, several common priorities have emerged: better transparency and access to information, simpler and more modern investment procedures, stronger digital services, improved institutional coordination and capacity, and deeper linkages between foreign investors and local suppliers. The next challenge is implementation.

Countries Can Speed Up Their Investment Agendas by Sharing Knowledge

One lesson has become increasingly clear through our work with governments: no country has to face these challenges alone. Many are confronting similar questions. How can investment procedures be simplified without compromising regulatory objectives? How can government agencies coordinate more effectively around investors? How can digital tools improve the investor experience? How can foreign investment create stronger connections with domestic firms? How can promotion and facilitation become part of a single strategy?

Countries across the region have expressed strong interest in exchanging experiences, learning from one another and accessing support in a more coordinated way. This shared interest led to the creation of the Network of Investment Promotion and Facilitation of Latin America and the Caribbean, launched in Panama on October 20 during the IDB Trade and Investment Regional Policy Dialogue.

The idea is straightforward: create a regional platform for sustained cooperation where countries can move faster by learning from each other.

The Network brings together national ministries responsible for investment, investment promotion agencies and other authorities that shape the investment climate. It is country-driven, pragmatic and action-oriented. 

Members will exchange good practices, learn from one another and connect with relevant expertise and technical and financial resources. Its core is public policy, but private sector participation will be essential: reforms designed without listening to those who invest, produce and create jobs are less effective. 

The Network will complement existing national, regional and multilateral initiatives, not duplicate them. Depending on its priorities, it will also work with relevant partners outside the region, such as the WTO, the OECD, the World Association of Investment Promotion Agencies and UN Trade and Development.

A Network Focused on Putting Reforms into Practice

Our ambition is to help countries turn reforms into results. We expect the Network to help governments compare practical approaches, learn faster from what works and what does not, and develop solutions suited to their institutions and development priorities. By exchanging implementation lessons, countries can also strengthen the investment facilitation agenda at the multilateral level.

The IDB will convene the Network and support it through analytical work and technical cooperation. Financing for governments and private companies will also help put into practice the policies and programs identified through the Network.

But ultimately, the value of the network will be measured by the reforms it helps advance, the problems it helps countries solve and the investment opportunities those improvements help unlock. Latin America and the Caribbean has the assets to compete successfully for global investment. Now we need to turn those advantages into more projects, in more economies, with greater benefits for local firms, workers and communities.

The gap between investment potential and investment impact is real, but we can close it. By bringing countries together around practical solutions, the new Network can help Latin America and the Caribbean attract more and better investment, and turn it into productivity, exports and quality jobs. We invite ministries and promotion agencies across the region to join us in building it.