Caribbean & Central America - August 2026

Central America's foreign direct investment (FDI) held broadly steady in 2025, according to a new report by the United Nations Economic Commission for Latin America and the Caribbean (Eclac). However, the region is becoming increasingly reliant on companies expanding existing operations rather than attracting new investment.

Central American nations received a total US$12.1bn in FDI in 2025, a decrease of 0.6% compared to the previous year, according to the latest edition of Eclac’s annual report on FDI, released at the end of June. This decrease comes as Latin America and the Caribbean (LAC) as a whole received US$194.2bn in FDI in 2025, up 1.7% year-on-year. Costa Rica received the highest amount of FDI of any Central American nation, and the seventh highest of any LAC nation, with US$5.6bn, up 3.4% compared to 2024. However, 77% of this total was made up of reinvested earnings, which grew 26% year-on-year, while new project announcements fell 30% year-on-year. By sector, manufacturing attracted 76% of the total, followed by services with 23%.

Guatemala received the second highest amount of FDI, with US$1.9bn, up 8.8% year-on-year and the second highest amount of any year since records began in 2001. Reinvested earnings made up 87% of the total, up 4.6% year-on-year, with significant concentration in the services sector (86% of total FDI), followed by manufacturing with 11%. Services was the only sector to record year-on-year growth, with 18.1%, whereas manufacturing and natural resources saw significant decreases of 40.7% and 69.8%, respectively. New project announcements were worth just US$189m, 75% less than in 2024, with not a single renewable energy or gas project announced last year.

Nicaragua attracted US$1.5bn in FDI in 2025, up 7.6% year-on-year, with services contributing 68% of the total and manufacturing a further 31%. Both sectors grew, by 18.9% and 11.9% year-on-year respectively, while natural resources attracted 96.2% less investment than in 2024. New project announcements decreased for the third year in a row, down 45% year-on-year to just US$16m, the lowest total since 2005. This continues a marked deceleration in new project announcements compared to 2010-2019, when Nicaragua attracted an average of US$490m per year for new projects, according to Eclac.

As for Honduras, Eclac figures show a spike in FDI to US$1.4bn, up 192.2% year-on-year and a significant increase compared to the last six years, when FDI has failed to surpass US$1bn per year. Inter-company loans made up 38% of total FDI after recording year-on-year growth of 253%, while reinvested earnings contributed 63%. New project announcements were worth US$50m, up 61% compared to 2024, but this total consists of just three projects. 

In Panama, FDI fell 55% year-on-year to just US$938m. This is due to the fact that reinvested earnings fell 80.1% and inter-company loans fell 47.8%, although new project announcements increased 57%. El Salvador saw total FDI decrease 27.3% year-on-year to US$764m, with services making up 68% of the total despite falling 43% for the period. Manufacturing was the second most valuable sector, representing 32% of the total, despite recording a 19% decrease. New project announcements were worth a total US$146m, down 93%.

Overall, FDI in Central America is increasingly reliant on reinvested earnings and inter-company loans than a raft of new investment projects. This is true even in Costa Rica, the largest recipient of FDI in the region, according to Eclac figures. Costa Rica’s investment promotion agency, Agencia Costarricense de Promoción de Inversiones (Cinde), reported that the country attracted 19 new projects in 2025, compared to 48 reinvestments. It highlighted that “new investments incorporated higher levels of technical sophistication, ranging from digital centres of excellence to advanced manufacturing and automated medical operations, underscoring the country’s transition toward high-value, knowledge-intensive activities”.

However, while it is desirable to attract new investment, the fact that firms with existing operations are deciding to stay and expand is no bad thing, said Sandro Zolezzi, a Costa Rican economist and research fellow at LEAD University, a private university in San José, in an article published on 7 April in local digital media outlet CRHoy.com. At the same time, Zolezzi highlighted that this source of investment will tend to dry up as firms find that they have expanded operations as far as they can, meaning that attracting new projects is key to maintaining an FDI pipeline. “A model based on reinvestment can sustain itself for a time, but, if it is not renewed, it will run out of steam,” said Zolezzi. 

In a press release marking the publication of the report, José Manuel Salazar-Xirinachs, Eclac’s executive secretary, said that understanding the relationship between trade and FDI is “is key to designing policies that would allow us to move towards more productive, inclusive and sustainable development”. In general terms, exports and FDI have expanded together in recent decades, and this pattern can be observed in those Central American nations that have attracted FDI as export platforms serving the US market, according to Eclac, particularly in manufacturing sectors that are highly integrated with the US. Looking ahead, Salazar-Xirinachs argues that navigating the “current global context of weaponized interdependence” requires action on a number of policy recommendations. These include diversifying export markets and sources of FDI away from the US; combining “trade, investment and productive development within a policy framework aimed at maximizing the impact of existing investment”; strengthening trade promotion agencies; and strengthening regional coordination arrangements. 

However, these recommendations are not new, and implementing them will not be easy. One of Central America’s main advantages is still to serve as an export platform to the US, and even those countries that have worked to cultivate relations with China have not managed to reduce the outsized reliance on the US as an export market. Developing policy frameworks is constrained by a lack of institutional capacity and strained public budgets, which also hamstrings efforts to build out trade promotion agencies and boost regional coordination. 

Social and political developments also affect the business climate and investment decisions, with many countries in the region raising red flags in terms of protest risks, instability, and legal certainty. For example, deepening authoritarianism in Nicaragua and El Salvador may be dampening FDI, while Panama’s closure of the Cobre Panamá mine has raised considerable concerns. Even in Costa Rica, which has a strong track record in attracting investment to move up value chains, a worsening security situation and concerns over the trajectory of the education system are calling into question the long-term sustainability of its existing development model.

Nearshoring

The nearshoring trend will also continue to be affected by uncertainty around US trade policy, particularly tariffs, making it harder for firms to make long-term decisions.