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Latin America’s economic outlook as an opportunity for investors

Infrastructure and energy industries have been drawing attention from investors and governments in the region

March 25, 2022

Latin America still has a long way to go in order to recover from the worldwide crisis caused by 2020’s pandemic. Although vaccination rates are higher than ever, new COVID-19 variants and waves in 2021 and the Russia-Ukraine conflict in 2022 have slowed down governments and investors' efforts to make the economy reach pre-pandemic levels across the world. At the beginning of 2022, for example, the International Monetary Fund (IMF) lowered its annual economic growth forecast for the region and its two main economies, Brazil and Mexico.
Nonetheless, growth projections of the Gross Domestic Product (GDP) in Latin America and the Caribbean for the upcoming years are positive. For 2023, the IMF estimates a 2.6% growth rate, with Brazil at 1.6%, Mexico at 2.7% and Argentina at 2.5%. Regarding infrastructure and energy initiatives, there is significant room to leverage the opportunities offered by the region in renewables, roads, ports, airports, urban mobility, water sanitation, and railroads.

Infrastructure and energy industries

Looking at the infrastructure landscape, in Brazil, there have been numerous actions from the Brazilian Development Bank (BNDES) to facilitate investments in most of these aforementioned areas. At the same time, in Colombia, since 2020 the government and industry leaders, such as Odinsa, have been working on the 5G Plan, which involves 26 infrastructure projects around US$ 50 billion worth of investments. In Chile, conversations have revolved around expectations for the new elected government, sustainability efforts and an organized concession plan. Meanwhile, in Mexico, the government assures “[...] competitive conditions for the private sector’s participation in infrastructure projects, such as (a) a full commitment to constant public investment; (b) a well-defined strategy, supported by long term planning; (c) diversified long term public and private funding, in local and foreign currencies; and (d) a solid institutional and legal framework”.   
Shifting our focus to the energy industry, recent analyses show that the use of fossil fuels is consistently declining and 77% of investments in power generation worldwide will be in renewables until 2050. Indeed, companies and governments have made great strides in Latin America, especially when it comes down to renewable projects. Chile, for instance, has overtaken Brazil and Mexico in attracting foreign capital in the sector last year. In fact, over 40% of total foreign investment (FDI) projects in the country were in renewable energy as of 2020. However, Brazil’s presence is still major globally, since the country is one of the largest job creators in renewables, according to a 2020 report from the International Renewable Energy Agency (Irena). Plus, data from October of last year shows that Brazil ranks 9th in the EY Renewable Energy Country Attractiveness Index (RECAI), which assesses the world’s top 40 markets based on the attractiveness of their renewable energy investment and deployment opportunities. Chile (11th), Argentina (25th) and Mexico (33rd) also show up on the ranking, an evidence of Latin America markets’ potential today and in the not so distant future.            

A platform to engage with worldwide leaders

 On May 11th and 12th GRI Club will host the seventh edition of its Latin America conference: Latam GRI Infra & Energy 2022. This is a key annual event for government authorities, investors, concession operators and specialists in the region, and it represents a milestone, gathering over 300 leaders. The topics to be discussed range from project finance, long-term infrastructure planning, energy transition, green recovery and climate change to ESG bonds, concessions, renewables, urban and digital infrastructure, and international supply chains. Learn more and join:
Written by Lucas Badaracco
Latam GRI Infra & Energy 2022 will connect the most influential infrastructure players and government representatives on May 11th and 12th in The Westin New York at Times Square, New York, USA.
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