Caribbean & Central American Countries of the Future 2015/16 – Winners

It was a year of mixed results for global FDI in 2014. According to greenfield investment monitor fDi Markets, capital investment across the world increased by an estimated 1% from $642bn in 2013 to $649bn in 2014, while job creation rose by an impressive 17% to 1.84 million. However, FDI project numbers actually fell by 1% to 12,069. The Caribbean & Central America region experienced an even sharper decline, recording an 8.89% decrease in the number of FDI projects from 2013 to 2014. 

Some countries in the region bucked this trend. Just over a third of locations in the ranking recorded significant increases in the number of FDI projects they attracted.

Top trio

Costa Rica retained its position as the leading destination for FDI projects in fDi’s Caribbean & Central American Countries of the Future 2015/16 ranking, winning 29 in 2014, four more than Panama. Costa Rica’s stable political and economic structures play a large role in continuing to attract investors, particularly those involved in hi-tech manufacturing, as companies take advantage of the country’s well-educated workforce. In addition, the government is pursuing a policy of making Costa Rica “the Silicon Valley of Latin America”. Billion-dollar technology giants such as Acer and Microsoft are investing in the country, indicating that the policy is already paying off. Costa Rica has a free-trade agreement with its primary FDI source market, the US, which aided its ranking as the top destination in the Business Friendliness category.

Ranking first in the Human Capital and Lifestyle category, the country’s emphasis on education is borne out by the fact it has the highest number of tertiary-level education institutions in the region, as well as the largest number of international business schools. Costa Rica also performed strongly in the Economic Potential and Connectivity categories, ranking second and sixth, respectively.

Panama maintained its number two position overall, topping the Economic Potential and Connectivity categories, as well as making the top five of the remaining three categories. Between 2009 and 2013, Panama’s GDP averaged double-figure growth rates in GDP, which contributed to its high ranking in the Economic Potential category. Panama has begun to reap the rewards of major infrastructure projects announced in 2011, such as the expansion of the Panama Canal and investments in roads and airports, allowing it to maintain a distinct edge on its competitors and ultimately win the Connectivity category. This, coupled with the free-trade agreement with the US, enabled Panama to increase its inward FDI projects by 47% between 2012 and 2014.

Improved performances in the Economic Potential (fourth), Connectivity (third) and Business Friendliness (second) categories helped Puerto Rico move up to third place overall in the 2015/16 rankings, a climb of three positions from the 2013/14 rankings. However, amid continuing uncertainty over the territory’s public finances along with the looming threat of a default on its debt, the economic climate in Puerto Rico may change significantly in the coming months.

With the decline in the number of FDI projects from 2013 to 2014 in major sectors such as financial services, and hotels and tourism, for countries in the region there will be greater competition for fewer projects. As such, it is important that countries encourage infrastructure and skills development, as well as look to emerging sectors and subsectors.