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Foreign Investment Flows Diverge Sharply Across Central America

By Guy José Bendaña-Guerrero & Asociados

According to the report La Inversión Extranjera Directa en América Latina y el Caribe, 2026, published by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Nicaragua received USD 1.503 billion in foreign direct investment during 2025, a 7.6 percent increase over the prior year that placed the country third among the six Central American economies covered by the study. Nicaragua's inflows sat between Guatemala's USD 1.882 billion and Honduras's USD 1.396 billion, forming a middle tier distinct from both the region's strongest performer and its weakest two.

Guatemala posted the second-highest total in the subregion, with its USD 1.882 billion marking an 8.8 percent increase over 2024. Honduras registered the sharpest swing of any Central American country, with inflows jumping 192 percent to reach USD 1.396 billion, according to the report's country-by-country tables. At the top of the ranking, Costa Rica drew USD 5.587 billion, extending a run of more than USD 5 billion in annual inflows for a fourth consecutive year.

Panama and El Salvador closed out the six-country list, and both recorded outright declines rather than gains. Panama's inflows fell 55 percent compared with the prior year, landing at USD 938 million, while El Salvador registered USD 764 million, a 27.3 percent drop from the USD 1.051 billion it received in 2024. ECLAC's country tables note that, taken together, Central America received USD 12.069 billion in 2025, essentially flat compared with the USD 12.144 billion recorded the previous year, a net change of just -0.6 percent that masks sharply divergent national trajectories.

The report situates the subregion within a broader account of how foreign investment reaches Central American economies. ECLAC describes them as having become platforms for export-oriented production, noting that in some Central American countries the evolution of exports and investment inflows has moved together because these economies have positioned themselves as investment destinations serving external markets rather than domestic demand. That framing contrasts with South America, where the report attributes a larger share of investment to strategies aimed at securing natural resources or serving internal markets.

Beyond the country totals, ECLAC's global figures for 2025 provide context for the year Central America just closed. Worldwide FDI inflows grew 14 percent to reach USD 1.6 trillion, driven largely by developed economies, while inflows into China fell for a third consecutive year, down 8 percent, continuing a decline that has reduced the country's annual haul from an average of 106 billion dollars between 2005 and 2009 to just USD 22 billion announced in project pledges during 2025. Latin America and the Caribbean as a whole received USD 194.233 billion, a modest 1.7 percent increase over 2024, with Brazil and Mexico alone absorbing 62 percent of that total.

Investment announcements, a separate indicator ECLAC tracks alongside balance-of-payments data because it signals future project pipelines rather than capital already disbursed, told a different story for the region. Announced FDI projects across Latin America and the Caribbean totaled USD 114.1 billion in 2025, a 34.3 percent drop from 2024, the sharpest regional decline of any part of the world that year. Sectors most exposed to United States tariff measures were hit hardest: announcements in goods-producing sectors fell 66 percent overall, automotive-sector announcements dropped 46 percent, and electronic-component announcements fell 49 percent, figures the report links directly to uncertainty introduced by Washington's shifting trade policy.

That policy shift forms the backbone of a dedicated chapter in this year's edition. Since January 2025, the report notes, the United States introduced sector-specific tariffs of up to 50 percent on steel, aluminum, copper, automobiles and auto parts, alongside a baseline "reciprocal" tariff of 10 percent applied to most imports. For economies with a heavy export orientation toward the United States market, a category that includes several Central American countries alongside Mexico and parts of the Caribbean, the report warns that access to that market became, in its own words, "más contingente, reversible y sujeto a negociaciones bilaterales."

Within the mix of investment types tracked in the balance of payments, reinvested earnings by companies already operating in the region remained the dominant component in 2025 at 51 percent of total inflows, even as that figure slipped 4.7 percent year over year. Fresh capital contributions, generally considered the clearest signal of new corporate interest in the region, rose 4.8 percent and made up 34 percent of the total, while intercompany loans climbed 26.2 percent to account for the remaining 15 percent. ECLAC's report closes its regional overview by calling for policies that are, in its words, more strategic, more selective and better coordinated, arguing that countries need to align investment-attraction efforts more closely with productive-development strategies, workforce skills and regional integration if the gains are to translate into broader economic transformation.