This overview chapter sets the scene for the report and brings together the main findings from the four thematic chapters. It outlines Latin America and the Caribbean’s (LAC’s) ambition to build a more sustainable, resilient and inclusive economic model and the region’s progress and challenges in achieving this. It discusses how the region can leverage foreign direct investment (FDI), particularly EU investment, to advance its priorities, drawing on its structural importance in LAC economies and recent shifts in investor patterns. The chapter highlights evidence of FDI’s contribution to structural transformation and labour market outcomes, complemented by insights from country and thematic case studies. It concludes by identifying priority policy areas for LAC policymakers and opportunities for deeper collaboration with the EU under the EU–LAC Global Gateway Investment Agenda.
Assessing the Socio‑economic Impact of Foreign Direct Investment in Latin America and the Caribbean
Abstract
1.1.1. LAC economies face diverse development realities, but share a common aspiration of moving towards a more sustainable and inclusive growth model
Countries in Latin America and the Caribbean (LAC) are navigating a complex and evolving path towards sustainable development, marked by notable progress in social inclusion and institutional reforms. Since the adoption of the United Nations (UN) 2030 Agenda for Sustainable Development, LAC countries have made sustained efforts to align national development strategies with Sustainable Development Goals (SDGs). But achieving these goals will require vast financial resources: the region’s annual SDG financing gap is estimated at around USD 99 billion. Bridging this gap calls for a comprehensive and co-ordinated approach that mobilises both public and private financing at national, regional and international levels. Foreign direct investment (FDI) can be a key driver in this process by fostering productive transformation and promoting innovation and skills development, and the generation of quality employment across the economy. The EU–LAC Global Gateway Investment Agenda (GGIA) (Box 1.1) builds on this potential, serving as a strategic framework to stimulate inclusive and green growth through investment in digital connectivity, renewable energy and sustainable value chains.
The region has achieved significant social progress over the past two decades, but subdued economic performance has weighed on these gains, reflecting long-standing structural challenges. Poverty fell markedly from 45.7% of the population in 2003 to 26.8% in 2024, while extreme poverty declined more modestly, from 12.2% to 10.4% over the same period. High informality underlies low incomes and limited social protection, with more than half of LAC workers (55.1%) employed informally in 2023. Economic activity remains fragile, with potential GDP per capita growth consistently lagging behind that of advanced economies by about 1 percentage point. Persistent inequality and climate vulnerability continue to constrain development prospects (OECD et al., 2025[1]).
Low productivity growth remains a major structural constraint, limiting the region’s capacity for sustained and inclusive growth. In 2024, average labour productivity per hour worked in LAC amounted to just 38% of the OECD average compared to 43% in 1990 (Figure 1.1, Panel A). This widening gap reflects multiple factors, including low levels of innovation and technological adoption, high informality and inefficient resource allocation across sectors and firms. In particular, persistently low investment in physical and human capital has constrained productivity gains, limiting the region’s capacity to foster structural transformation and undergo the necessary production transformation toward environmental sustainability, social inclusion and resilience (OECD et al., 2024[2]; 2025[1]).
Low total investment remains a key structural bottleneck for LAC, constraining progress towards higher productivity and improved living standards. In 2024, total investment averaged 19.4% of GDP, below advanced economies (22.3%) and well behind emerging Asia (37.5%), and the Middle East and Central Asia (26.2%) (Figure 1.1, Panel B). Investment in LAC has hovered at around 20% of GDP since the early 1980, consistently below most developing regions. Low investment continues to hold back growth, productivity and social progress across the region (OECD et al., 2024[2]).
Note: Panel A refers to labour productivity per person employed. Simple averages are compared between 38 OECD economies and 15 LAC economies. Panel B refers to total investment as a percentage of GDP. Total investment in an economy, often measured as gross capital formation, refers to the sum of expenditures on additions to fixed assets and net changes in inventories. Fixed assets include infrastructure, machinery, equipment, and buildings used in the production of goods and services for more than one year.
Source: Based on The Conference Board (2025[3]), Total Economy Database, https://www.conference-board.org/topics/total-economy-database; IMF (2025[4]), World Economic Outlook database, https://www.imf.org/en/Publications/WEO/weo-database/2025/april.
Despite the need to boost investment, limited fiscal space constrains the region’s capacity to act in the short term. Tax revenues in LAC, essential for financing public services, infrastructure and social programmes, remain insufficient to finance the scale of investment required to meet development objectives. In 2023, LAC’s tax revenues amounted to just 21.2% of GDP, ranging from 11.5% in Guyana to 32.0% in Brazil, well below the OECD average of 33.9% (OECD, 2025[5]). Public debt in LAC remains elevated despite signs of stabilisation. In 2024, the region’s average debt-to-GDP ratio was still above pre-pandemic levels, reflecting improved fiscal balances but persistent financing needs. Driven by tighter global financial conditions and elevated regional risk premiums, rising debt-servicing costs and higher implicit interest rates are further eroding fiscal space. Climate vulnerability, particularly in Central America and the Caribbean, compounds these pressures by increasing the cost of capital (OECD et al., 2024[2]).
Nonetheless, there are significant opportunities emerging in LAC to foster a more sustainable and inclusive growth model. The region’s abundant endowment of renewable energy resources, critical minerals and biodiversity are a solid base for developing green industries and related services (OECD et al., 2023[6]). Demographic trends and improvements in the quality of education have gradually strengthened the region’s skills base. However, significant mismatches persist between labour market needs and workforce skills, particularly in science, technology, engineering and digital fields. If effectively channelled, however, these dynamics could support higher investment, productivity gains and more resilient growth.
The EU Global Gateway Strategy is an initiative launched in 2021 by the European Commission and the European Union High Representative to support infrastructure development globally. To date, it has already mobilised up to EUR 300 billion in investments through co-ordinated efforts by the EU, its Member States and European financial institutions. The strategy focuses on infrastructure that supports inclusive economic growth, digital and green transitions, and resilience in partner countries. It outlines five priority areas for partnerships and emphasises adherence to international standards, including those related to governance, environmental protection, social and labour rights, and community engagement. The Global Gateway aligns with the objectives of the United Nations 2030 Agenda for Sustainable Development and the Paris Agreement on climate change.
Digital – Promoting secure and inclusive digital connectivity and infrastructure
Climate and energy – Supporting renewable energy, energy efficiency and climate-resilient infrastructure
Transport – Enhancing sustainable transport networks and trade corridors
Health – Strengthening health systems and access to essential services by focusing on secure pharmaceutical supply chains, local manufacturing and epidemic preparedness
Education and research – Advancing inclusive education, skills development and knowledge exchange
In 2023, the third EU-CELAC (Community of Latin American and Caribbean States) Summit of Heads of State and Government recognised the value of a joint EU–LAC Global Gateway Investment Agenda (GGIA) to boost sustainable investments among the two regions in key sectors of common interest. It targets transformative investment projects across LAC and actions revolve around key pillars including fair green transitions, inclusive digital transformation, health resilience and equitable access to health products including vaccines, and human development with a focus on education, skills and inequality reduction.
Source: European Commision (2025[7]), Global gateway Overview; https://international-partnerships.ec.europa.eu/policies/global-gateway/global-gateway-overview_en.
1.1.2. FDI has contributed to shaping LAC’s economic trajectory and can help drive future priorities
FDI is essential to closing the region’s investment gap amid limited fiscal space constraining public investment. As a key source of private capital, FDI already plays an important part in financing productive activities, and its contribution is critical for directing resources towards strategic sectors and supporting sustainable and inclusive growth. This type of investment has long been a cornerstone of growth in LAC. It has provided financing, shaped industrial development and supported the region’s integration into global value chains (OECD et al., 2023[6]). Over the past two decades, FDI inflows averaged around 3% of GDP, above other regions such as the Middle East and North Africa (2.7%), East Asia and the Pacific (2.3%) and South Asia (1.4%) (Figure 1.2). Since 2013, FDI has been volatile due to shifting global and regional conditions, and rising competition from other emerging markets; nevertheless, it has retained its structural significance, highlighting LAC’s continued attractiveness to foreign investors.
Net FDI inflows as % of GDP, 2003-2023
Source: Based on World Bank (2024[8]), Foreign direct investment, net inflows (% of GDP), https://data.worldbank.org/indicator/BM.KLT.DINV.CD.WD.
Note: Greenfield FDI in GGIA-related sectors include: digital (information and communication, electronics, electrical machinery); climate and energy (renewable energy); transport (electric motor vehicles within “motor vehicles”) and health (chemicals, pharmaceuticals, medical instruments, health and social work). Investments in education and research are cross-cutting in nature and cannot be captured within the ISIC Rev. 4 sector classification.
Source: Based on Financial Times (2025[9]), FDI Markets (database), https://www.fdimarkets.com/ .
The European Union (EU) has been a leading and reliable investor in LAC. Between 2014 and 2024, EU firms accounted for about USD 300 billion in greenfield FDI, around 29% of the total, ahead of investors from the United States (26%), LAC itself (8%), the People’s Republic of China (hereafter ‘China’) (7%) and the United Kingdom (7%) (Figure 1.3, Panel A). This confirms a long-standing pattern, as EU enterprises have been the region’s main source of greenfield investment since the early 2000s. Over time, their investments have become increasingly aligned with the priority sectors highlighted by the EU–LAC Global Gateway Investment Agenda (GGIA) (Box 1.1). The share of EU greenfield FDI targeting GGIA-related sectors rose from 33% to 44% over the past decade, led by strong growth in renewable energy, alongside significant investment in digital services and health-related industries (Figure 1.3, Panel B).
1.2.1. FDI in LAC is still concentrated in traditional resource-based and medium-tech sectors, but shifting toward more sustainable, higher-value-added activities
FDI is a critical driver of structural transformation and integration into global value chains (GVCs) in LAC. Over the past decade, about 22% of total greenfield FDI was directed to traditional resource-based sectors, notably mining and fossil fuels. About 35% went to manufacturing, especially medium-tech motor vehicles, which accounted for about 11% of greenfield FDI.
While these investments have supported industrialisation, they have also reinforced patterns of dependence on commodities and low-technology exports. As a result, the region’s insertion into GVCs is such that its raw materials and semi-processed goods are exported for transformation elsewhere. This has left many LAC economies vulnerable to external demand and global price volatility. Moreover, FDI in traditional resource-based activities has generated limited spillovers, constrained domestic value addition and contributed to environmental pressures, including higher CO₂ emissions.
In recent years, LAC investment has begun to shift. Renewable energy has attracted a growing share of greenfield projects, accounting for about 16% of total greenfield FDI between 2014 and 2024, 10 percentage points more than in the previous decade. The EU is the main investor in renewables, accounting for more than half of total investment in the sector, consistently with the key priority areas of the EU-LAC Global Gateway Investment Agenda (GGIA) (Box 2.1). FDI has also contributed to technological upgrading, supporting investment into higher-value segments of GVCs. Between 2014 and 2024, approximately 30% of greenfield FDI was channelled to higher-technology, knowledge-intensive activities. Of this, roughly 13% went to digital services, such as data hosting, programming and software development and away from early investments in telecommunications infrastructure (Figure 1.4). More broadly, EU firms have a strong presence in medium- to high-technology manufacturing.
Note: Digital sectors include digital services (e.g. computer programming activities, data processing and hosting activities, information service activities, etc.); ICT goods (electronics, computer equipment, etc.); electrical components (batteries, electrical equipment, wiring devices, etc.); and telecommunications (wired and wireless telecommunications activities and satellite activities).
Source: Based on Financial Times (2025[9]), FDI Markets (database), https://www.fdimarkets.com/ .
EU FDI is an important driver of export diversification and industrial upgrading in LAC. Empirical evidence produced for this report shows that a 10% increase in EU capital investment is linked to a 0.05 percentage-point rise in the share of medium- and high-tech goods in total exports and a 0.01 percentage-point increase in manufacturing value added as a share of GDP. These findings underscore the role of EU greenfield investment in advancing medium- and high-technology manufacturing and the importance of attracting greater FDI to these sectors. While LAC countries exhibit diverse economic structures, significant opportunities remain to channel FDI toward activities where the region’s potential is not yet fully tapped.
EU FDI has also helped in expanding clean energy capacity and supporting the region’s transition toward a more diversified and sustainable energy mix. Estimates show that a 10% increase in greenfield FDI from the EU is associated with a 0.3 percentage-point rise in the share of renewables in the energy mix, an increase of 1.2 tonnes of oil equivalent (toe) per 1 000 people in renewable energy supply and 0.1 toe per million USD of GDP (PPP) (Figure 1.5).
Note: The figure displays the estimated percentage-point impact of a 10% increase in two years lagged capital investment from announced renewable energy greenfield FDI projects on three variables, along with their 95% confidence intervals. “All” refers to all origin countries.
Source: Based on IRENA (2023[10]), Renewable Energy Statistics, https://www.irena.org/Data; Financial Times (2025[9]), FDI Markets (database), https://www.fdimarkets.com/; OLADE (2023[11]), Energy Information System of Latin America and the Caribbean, https://sielac.olade.org/.
1.2.2. FDI drives better jobs in LAC, but not everyone benefits equally. Women, in particular, risk being left behind, especially in fast-growing green and digital sectors
FDI is a vital engine of job creation in LAC. Between 2003 and 2024, greenfield FDI projects directly created an estimated 5.5 million jobs in the region. Measured against LAC’s domestic labour markets, the impact is significant: the number of jobs created by greenfield FDI over the past two decades amounts to roughly 4% of the region’s formal employment. It is also equivalent to 12% of all FDI-related jobs worldwide. This share is strikingly higher than the region’s demographic weight (8%), meaning that FDI in LAC generates a disproportionately large number of employment opportunities. Put another way, FDI in LAC has particularly high job intensity.
On average, each USD 1 billion invested in the region directly generates roughly 2 700 jobs, one of the highest ratios globally. Over the last two decades, the average number of jobs created per unit of investment in LAC has increased, reflecting an underlying shift in the composition of investment. Whereas earlier FDI projects in LAC were in more capital-intensive sectors, such as mining, fossil fuels and telecommunications, more recent greenfield FDI has gravitated toward labour-intensive activities, such as manufacturing, transport, business services and, increasingly, digital services.
Manufacturing continues to play a central role, accounting for 54% of all FDI-related jobs in the region. Within this sector, motor vehicles, food and electrical equipment remain significant employers. Services represent an important share of employment generated by FDI, amounting to 35% of the total. Particularly noteworthy is the contribution of digital services, which alone accounts for 10% of FDI-related jobs. This trajectory highlights how foreign investment has opened up opportunities in knowledge-intensive sectors, which are critical for technological upgrading and productivity growth.
The energy sector also stands out as an area of rapid change. While historically dominated by fossil fuels and other traditional resource-based activities, the sector is now experiencing a surge in renewable energy projects. FDI-related employment in renewable energy has doubled over the past decade, rising from 1% to 3% of total FDI-related jobs in the region. Although still modest in absolute terms, this trend confirms the increasing alignment of foreign investment with the global shift toward low-carbon production. In the last decade, 63% of energy-related FDI jobs were generated in the renewable energy sector, a significant increase from 35% in the previous decade. This trend shows the potential benefits for LAC of positioning itself as a key player in the green transition, building on its abundant natural resources for clean energy generation and export.
The European Union, alongside the United States, has consistently been a leading source of FDI-related job creation in LAC. Over the past two decades, the two sources together accounted for almost 60% of all greenfield FDI-related jobs in the region (Figure 1.6). While other players such as China have emerged in the investment landscape, their presence remains smaller, starting from a much lower base.
Source: Based on Financial Times (2025[9]), FDI Markets (database), https://www.fdimarkets.com/.
FDI in LAC has contributed not only to the creation of jobs but improvements in job quality. Foreign firms are more likely than domestic firms to offer permanent contracts and pay higher wages. In Bolivia and El Salvador, the wage premium associated with foreign firms is particularly pronounced among low-wage workers. This suggests that FDI can play a role in reducing wage inequality by lifting incomes at the lower end of the distribution.
Investment from the EU is concentrated in sectors associated with stronger labour market outcomes, many of which align with the EU–LAC GGIA’s strategic priorities. EU greenfield investment is prevalent in industries where wages are, on average, 1.5 to 1.8 times higher than other (Figure 1.7). These sectors are also characterised by higher levels of labour formality, greater access to social security, including pensions and health insurance, and stronger skills outcomes. At the same time, EU investment is disproportionately concentrated in sectors where gender disparities are more pronounced, limiting the opportunities for women to harvest the investment benefits in equal terms at sector level. Many industries with high EU greenfield investment are male-dominated and, in sectors with a more balanced gender representation, EU firms offer lower wages compared to other parts of the labour market, mirroring existing gender inequalities in the domestic labour market.
Average wage ratio between sectors receiving EU FDI compared to other sectors
Note: Selected sectors account for at least 80% of the jobs created by EU FDI in the country and include a minimum of five sectors, based on fDi Markets statistics over the five years preceding the most recent available household survey. The results shown in the following graphs are weighted averages for these sectors, using each sector’s share of total EU FDI-related job creation as a weight. For the remaining sectors — those receiving little or no EU FDI — simple (unweighted) averages are reported. Wage ratio calculated as average wage in FDI sector divided by average wage in non-FDI sector, based on main job. For further detail, please see Chapter 3 (Box 3.6).
Source: Based on Financial Times (2025[9]), FDI Markets (database), https://www.fdimarkets.com/; OECD (2024[12]), Key Indicators of Informality based on Individuals and their Households (KIIbIH) database, https://dataexplorer.oecd.org/vis?df[ds]=DisseminateFinalDMZ&df[id]=DSD_KIIBIH@DF_B11&df[ag]=OECD.DEV.LAC.
1.2.3. FDI has driven sectoral transformation, skills and job creation in Colombia, Costa Rica and the Dominican Republic, with the EU playing a key role
The experience of Colombia, Costa Rica and the Dominican Republic illustrates how significantly FDI from the European Union has advanced sustainable development across the region. Over the past two decades, FDI in Colombia, Costa Rica and the Dominican Republic has shifted toward more diversified, knowledge-intensive and sustainable investment, as in the rest of the region. EU investors have steered greenfield FDI toward renewable energy, digital technologies and higher-value-added manufacturing, supporting job creation and skills development. These countries highlight both the regional diversity and strategic weight of EU investment: Colombia, one of South America’s top FDI recipients, has seen EU firms drive diversification beyond extractives; Costa Rica has leveraged FDI for advanced manufacturing, especially of medical and pharmaceutical products; and the Dominican Republic has benefited from EU investment in energy and tourism.
Over the past two decades, FDI in renewables has expanded rapidly in Colombia, with over three-quarters of EU greenfield electricity projects between 2014 and 2024 targeting clean energy, followed by information and communication technology (ICT) and manufacturing. The EU was also the largest greenfield investor in the Dominican Republic (2003-2024), focusing on tourism and electricity, particularly solar energy, which rose from 2% to nearly 15% of total investments between the two decades, supporting energy diversification and sustainability goals. In Costa Rica, FDI has been pivotal to development, with EU and US investments strengthening high-technology manufacturing and global value chain integration, helping position the country as a leading hub for medical devices and pharmaceuticals.
During 2003-2024, the European Union and the United States drove investment in technology- and knowledge-intensive (TKI) sectors in Colombia and Costa Rica, while such investment has slowed in the Dominican Republic, except from LAC sources. In Colombia, the EU’s share of FDI in TKI sectors has remained stable, but declined in absolute terms, suggesting scope to reinforce its role in higher-value-added activities. In Costa Rica, the United States remains the main investor in TKI and R&D, while EU investment, though smaller, has grown steadily. Across the three countries, greenfield FDI in R&D remains limited, with the EU being the largest source for Colombia and the Dominican Republic, while the United States led in Costa Rica over the past two decades.
FDI has contributed significantly to not only structural transformation in the three countries, but creating more and better jobs, and promoting skills. During 2003-2024, EU firms led job creation in Colombia (36% of total jobs) and the Dominican Republic (35%) and were second to the United States in Costa Rica (17%). EU FDI job intensity in Colombia and Costa Rica rose substantially over the two decades, while it only increased moderately in the Dominican Republic. FDI has also contributed to skills development, enhancing the workforce’s capabilities. In Colombia, FDI in education and training has expanded strikingly, with the EU now the second-largest source after LAC. In Costa Rica, while greenfield FDI in education and training is limited, EU firms actively contribute to workforce upgrading.
Do foreign firms have better outcomes than domestic peers? (yes if score>0; no if score<0)
Note: This figure shows the relative difference between foreign and domestic firms on outcomes. Whiskers represent 95% confidence intervals. Panel A. Costa Rica is based on data from 2022, while Panel B. Dominican Republic was calculated on 2024 data. In Panel A. Costa Rica, the variable underlying export intensity was not thoroughly examined, and the precise value of the coefficient should be interpreted with caution. For further detail, please see the Annexes 4.A and 4.B Registro de contribuyentes de la Dirección General de Impuestos Internos de la República Dominicana (DGII).
Source: Based on Central Bank of Costa Rica (2025[13]) Registro de variables economicas del Banco Central de Costa Rica (REVEC); DGII (2025[14]) Registro de contribuyentes de la Dirección General de Impuestos Internos de la República Dominicana (DGII).
Foreign firms show more development impact than domestic ones. National firm data show that both in Costa Rica and the Dominican Republic, foreign firms substantially pay higher wages, are more productive and export more than their domestic counterparts (Figure 1.8). Sectors in which EU FDI is concentrated show important development outcomes. In Colombia, jobs generated by EU FDI are concentrated in sectors with higher wages and greater formality, but which are male-dominated occupations. In the Dominican Republic, jobs created by EU FDI are concentrated in sectors with higher wages and lower labour informality, and which are male-dominated, but also pay women better quality wages.
1.2.4. International development co-operation can amplify FDI effects
International development co-operation has increasingly complemented private sector efforts in the three countries. It has helped mobilise FDI and strengthen the countries’ productive sectors by focusing on better infrastructure and workforce skills and reinforcing regulations. In so doing, international development co-operation enhances the countries’ overall investment attractiveness. In Colombia, Official Development Assistance (ODA), including support designated to catalysed private sector mobilisation, has been broadly aligned with FDI sectoral trends, particularly in renewable energy and knowledge-intensive sectors. This underscores the potential for continuing to ensure greater coherence between international development co-operation and private investment efforts. Between 2003 and 2024, the EU devoted 36% of its production-sector ODA to energy, while 82% of mobilised private finance in Colombia targeted renewables. There are similar trends in the Dominican Republic, where mobilised private finance is only emerging, but overall, ODA has an important focus on renewable energy; and in Costa Rica, where mobilised private finance, historically limited, has recently expanded into new sectors, such as transport and storage, a key FDI area.
Skills development and training are key channels through which ODA can boost sectoral transformation, employability and investment attractiveness. EU countries and institutions were the largest donors of ODA to education and skills in Costa Rica and the Dominican Republic, and second after the UK in Colombia. In all three countries, EU ODA predominantly targeted vocational education and training, directly building workforce capabilities.
1.2.5. EU firms’ TVET programmes in LAC can foster skills development, boost youth employment and advance social inclusion
Education and skills are critical foundations for productivity, innovation and inclusive growth, yet significant gaps remain in LAC. Foundational learning outcomes remain weak and public spending on education stood at 4.6% of GDP in 2020 (Arias et al., 2023[15]). Investment in technical and vocational education, and training (TVET) is even lower, averaging less than 0.2% of GDP (World Bank, UNESCO & ILO, 2023[16]).
According to the World Bank Enterprise Surveys, about 39% of firms across the region provide training to their permanent employees, though participation rates vary widely between countries (Figure 1.9). While around 63% of workers take part in some form of training, these opportunities are largely funded by firms themselves, with minimal public support. Compared to local firms, European firms in LAC typically invest more in training, offer higher wages and employ more permanent workers.
Informal workers, who make up more than half of LAC’s labour force (OECD, 2024[17]), have particularly limited access to such training. Similarly, small- and medium-sized enterprises (SMEs), which form the backbone of regional economies, report low levels of TVET engagement (Flores-Lima et al., 2014[18]). These disparities contribute to persistent productivity gaps, limited social mobility and rising inequality. Much of the private sector’s investment in training is reactive, driven by existing skills shortages. Employers frequently highlight this issue, with nearly one in four firms citing an inadequately skilled workforce as a major barrier to growth.
Note: The regional averages reported here are based on the number of countries indicated in brackets following the region’s name. The regional averages are based on data collected over different years within the 2009-2025 period as the reference fiscal year varies by country.
Source: Based on World Bank (2024[19]), World Bank Surveys, https://www.enterprisesurveys.org/en/data/exploretopics/workforce.
TVET is a long-standing pillar of education systems in Europe. Strong institutional frameworks, close co-ordination with employers and the integration of learning and work experiences has helped European systems achieve smoother school-to-work transitions and promote inclusive growth. Dual training models pioneered in countries like Germany, Austria and Switzerland combine classroom instruction with practical, on-the-job experience. Many LAC countries have drawn inspiration from these models, adapting them to local labour market conditions rather than replicating them wholesale.
Several European firms operating in the region have played a key role in strengthening skills systems. This report has focused on four companies from the telecommunications, manufacturing and banking sectors that have invested in training in LAC. They share several best practices, making them valuable models for other European and international companies seeking to strengthen skills development in the region:
Strong public-private partnerships drive employment outcomes: European firms have expanded TVET opportunities in LAC through such partnerships. For instance, Volkswagen de México’s Dual Training Centre with the Technological University of Puebla has produced nearly 6 000 mechatronics graduates now employed at Volkswagen or its suppliers, while its collaboration with the College of Scientific and Technological Studies of Guanajuato trains students directly for jobs at the Silao engine plant.
Aligning training with labour market demand enhances employability. All four firms prioritise employability, focusing on high-demand skills, such as digital literacy, automation, programming and leadership. Initiatives such as Telefónica’s Programming Campuses and Digital Minds, advance digital inclusion and upskilling for students, teachers, youth and its own workforce.
Digital and hybrid models expand access and flexibility. Digital platforms and blended learning have greatly expanded access to TVET. Santander Open Academy exemplifies this approach, offering flexible, scalable online and hybrid programmes in digital skills, languages and leadership aligned with labour market needs.
Inclusiveness advances gender equality and disability inclusion. Telefónica’s Mujeres en Red programme prepares women in Peru and Colombia for technical careers in telecommunications, offering both technical and psychosocial support. The company’s workforce strategy also prioritises disability inclusion, employing 2 700 persons with disabilities in 2023.
Engaging youth and empowering educators to sustain TVET excellence. Recognising the importance of attracting young people to technical careers, companies have launched school outreach and awareness initiatives. Siemens’ Experimento promotes STEM learning through hands-on activities and offers teachers free professional development and high-quality instructional resources.
Data-driven evaluation reinforces quality and labour market relevance. Continuous monitoring and evaluation ensure training stays effective and aligned with labour market needs. Santander applies a robust framework to track participation, completion, satisfaction and institutional engagement across its TVET initiatives, using these insights to refine programmes and enhance employability outcomes.
Long a key driver of growth in LAC, FDI can significantly advance sustainable development in the region. It can support economic diversification, technology upgrading and the creation of quality jobs with deliberate, well-co-ordinated policy action. The policy areas outlined in this section highlight where LAC governments could focus to maximise the benefits of investment and how LAC and EU governments can define shared priorities for future joint action. Adapting the OECD’s FDI Qualities Indicators to the EU–LAC context and embedding evidence-based approaches (OECD et al., 2024[2]) in structured policy dialogues (including EU–CELAC and Global Gateway frameworks) could move investment strategies closer in line with sustainable development. These policy considerations are informed by the OECD Council Recommendation on FDI Qualities and the FDI Qualities Policy Toolkit (Box 1.2).
The Recommendation on FDI Qualities is structured around the following high-level policy principles/directions, drawn from the FDI Qualities Policy Toolkit:
Governance: Provide coherent strategic direction on fostering investment for sustainable development and fostering policy continuity and effective implementation of such policies.
Domestic policy and legal frameworks: Ensure that domestic policy and legal frameworks support investments having positive impacts on sustainable development.
Financial and technical support: Prioritise sustainable development objectives when providing financial and technical support to stimulate investment.
Information and facilitation services: Facilitate and promote investment for sustainable development opportunities by addressing information failures and administrative barriers.
Development co-operation: Strengthen the role of development co-operation for mobilising FDI and enhancing its positive impact in developing countries.
The FDI Qualities Policy Toolkit is also structured along these policy principles and provides detailed guidance to governments on enhancing FDI contribution to economic development. The Recommendation builds on other standards developed by the OECD in international investment, including the Declaration on International Investment and Multinational Enterprises.
Source: OECD (2022[21]),FDI Qualities Policy Toolkit, https://www.oecd.org/en/publications/fdi-qualities-policy-toolkit_7ba74100-en.html.
Along with the FDI Qualities Indicators, Policy Toolkit and Recommendation, the FDI Qualities Guide for Development Co-operation provides a framework for strengthening development co-operation to better mobilise FDI and enhance its positive impact. The guide reviews policies for enhancing the impact of FDI on sustainable development. It outlines ways development partners can consider the impact of FDI in their strategies and supports the design, implementation and monitoring of FDI-related assistance (OECD, 2022[20]).
1.3.1. Strengthen governance, policy co-ordination and institutional capacity
Strengthening the alignment between investment frameworks and broader development objectives is a central policy priority for LAC governments. Across the region, investment strategies are increasingly connected to broader agendas, such as productivity upgrading, the green transition and digitalisation, but these links may not always be coherent or guided by a common long-term vision. Their implementation may also be challenging as responsibilities for economic, social and environmental policies are distributed across multiple ministries and agencies, hindering effective co-ordination and diluting the impact of national investment strategies. Strengthening co-ordination across policy domains, particularly investment, industrial, labour, social, education, environmental, digital and innovation policies, can unlock synergies and enhance the coherence of development strategies. This is especially relevant in LAC, where economic activity is concentrated in a limited number of sectors, informality is widespread and institutional capacities vary significantly.
Developing more robust data systems and monitoring frameworks is an important area for continued policy attention. In many LAC economies, FDI data are available only in aggregate form, limiting assessment of the broader economic and labour market impacts of investment. Strengthening statistical capacity to generate consistent, disaggregated and comparable data would improve LAC policymakers’ ability to assess the quality and inclusiveness of investment. Enhanced data would also support monitoring how FDI interacts with major transformations underway in LAC economies, such as the digital transformation and green transition, and would give a more accurate picture of the impact that FDI is having on different segments of the workforce. Such systems also allow anticipating emerging skills needs, including that of foreign investors, in expanding sectors. Co-ordination between investment and skills policies is particularly relevant in LAC, where advancing productive and technological upgrading and reducing social inequalities are key priorities.
1.3.2. Ensure that domestic legal and regulatory frameworks create a conducive business environment, while supporting sustainable development outcomes
A transparent, predictable and open business environment is essential for attracting and retaining quality investment. In some LAC economies, regulatory complexity, administrative barriers and sectoral restrictions create uncertainty for investors. Ensuring a stable and coherent domestic framework, while maintaining safeguards for national priorities, can foster investor confidence and enable FDI to play a stronger role in advancing long-term development objectives (OECD, 2015[22]).
Greater alignment with international labour and environmental standards remains an important area of focus for LAC. Strengthening the coherence between domestic legislation and enforcement, and global norms, such as the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (RBC) (OECD, 2023[23]) and the OECD Due Diligence Guidance for RBC (OECD, 2018[24]), strengthens the connection between investment and positive social, labour and environmental outcomes. In a region marked by informality, inequality and uneven labour opportunities, embedding such standards helps make FDI a driver of decent work, gender equality and sustainable growth, while deepening integration into GVCs.
1.3.3. Leverage financial and technical support, and facilitation services to strengthen local capabilities and deepen FDI linkages
Financial support instruments, including tax incentives, can attract investment that contributes to sustainable and inclusive growth. Their effectiveness and efficiency, however, depends on sound policy design and systematic evaluation. Given the constrained fiscal space in many LAC countries, these measures must be transparent, cost-effective and closely aligned with national development priorities (OECD, forthcoming[25]; 2025[26]). To maximise their sustainable impact, governments in the region should periodically evaluate that financial support instruments effectively lower the cost of capital for additional investment that would not occur otherwise. Governments would do well to re-assess existing tools to ensure that support is channelled towards sectors and activities with strong spillover effects, including economic diversification, value-chain upgrading and skills development. Tying financial support instruments to broader social goals, such as gender equality, can also ensure that FDI benefits are more widely and fairly shared across society.
Technical support is critical to maximise the development impact of FDI in LAC, helping local firms, especially small- and medium-sized enterprises (SMEs), and workers benefit more fully from knowledge and technology spillovers. Structural barriers to productive upgrading often hinder domestic enterprises from connecting with foreign investors and moving up value chains. Targeted initiatives, such as supplier development and SME upgrading programmes, can strengthen firms’ capabilities, promote their integration into regional and global value chains, and increase the share of value retained locally. Development co-operation plays a key role in this process by co-financing and facilitating partnerships that help local firms meet international standards and adopt advanced technologies. EU companies are well placed to act as catalysts for change here. They can transfer know-how, promote inclusive supply chains and embed sustainability within their business operations.
Extending support to the workforce through well-designed active labour market policies (ALMPs) and vocational education and training (VET) systems reduces skills mismatches and broadens access to quality jobs, especially for vulnerable groups. Partnering with foreign investors, including EU firms already engaged in training, can further strengthen these efforts by aligning skills development with labour market demand, particularly in high-growth areas, such as the green and digital sectors. To maximise impact, these policies should also be more closely tied to social inclusion objectives, such as promoting gender equality and increasing the participation of underrepresented groups.
Information and facilitation services help reduce barriers to investment by providing clarity on rules and procedures, and creating an environment in which investors can operate efficiently. In most countries, investment promotion agencies (IPAs) act as the main point of contact for foreign investors and a key entry point into the local economy (OECD, 2018[27]). Beyond this gateway role, they also provide aftercare services to maximise the development impact of investment already present in the region. For many LAC countries, the strategic priority is not only to attract new investors but retain existing ones and deepen their linkages with domestic firms and markets. To achieve this, LAC governments should consider strengthening the capacity of IPAs and related services, ensuring they can deliver timely and transparent information, connect investors with local partners, support expansion into higher-value-added activities and promote adherence to social and environmental standards.
1.3.4. Aligning development co-operation efforts of the EU and other partners with LAC investment priorities
International development co-operation is an important tool for LAC governments, helping them to better align FDI with their long-term development ambitions. The interplay between FDI and development co-operation is deepening, with strategies like the EU–LAC Global Gateway Investment Agenda (GGIA) at the forefront. Partners are increasingly deploying guarantees, blended finance and equity co-investments alongside policy and project-preparation support to de-risk projects, attract institutional investors and align finance with national priorities. Development co-operation plays a crucial role in strengthening the enabling environment for FDI by supporting regulatory reforms, skills development and training initiatives that enhance investment quality and maximise development impact.
Co-operation and FDI should work together as an integrated system to maximise development impact (OECD, 2022[20]). Aligning co-operation, including private sector mobilisation, official development assistance (ODA) and broader official financing flows with key FDI sectors can create stronger synergies between public goals and private investment priorities and incentives. The growing alignment between co-operation and FDI to support the green transition is a valuable example to build on. Strengthening this coherence can better connect investment with measures that enhance sustainability and impact, particularly through ODA support to key enablers such as infrastructure, skills and finance. Greater alignment would make the most of scarce ODA resources so that they are more focused and predictable, reducing volatility and reliance on one-off projects.
The ambition of the recently launched Global Gateway Investment Hub is to create such a system by serving as a single-entry point for EU companies to submit investment proposals and access EU financial and non-financial support. It connects private projects with resources from the European Commission, the European Investment Bank (EIB), development finance institutions (DFIs), export-credit agencies and national governments, fostering impactful investments that advance sustainable development, while creating opportunities for EU businesses. Strengthening co-ordination between multilateral development banks (MDBs), bilateral development finance institutions (bilateral DFIs), national development finance institutions and the private sector in LAC countries is essential to enhance the development impact of FDI. Establishing structured collaboration mechanisms, such as joint investment platforms or policy dialogues, can steer investment toward priority sectors and regions, while promoting positive spillovers through initiatives focused on supplier development, local content, quality job creation and technology transfer. Such co-operation can also support infrastructure, skills and innovation ecosystems in underserved areas, ensuring that the benefits of FDI are more inclusive and territorially balanced.
Development co-operation should strengthen technical assistance and capacity-building (TACB) to help LAC countries navigate the evolving sustainable development finance landscape. Enhanced capacities enable effective use of innovative instruments, such as debt and disaster-risk management tools; green, social and sustainability (GSSS) bonds; blended finance and sovereign carbon credits, while supporting an enabling investment environment. Strong institutions facilitate local financial market development, attract high-quality FDI and implement bankable projects that maximise development impact. An example is the Global Green Bond Initiative under the aegis of EU’s Global Gateway, which supports LAC in developing green bond markets and providing technical assistance to help establish green bond frameworks, enhance capacity and attract international investors to promote a low-carbon transition.
Leveraging the development impact of FDI in LAC is critical amid constrained resources, geopolitical uncertainty and shifting economic ties. Strengthening the evidence base on FDI’s socio-economic impact and the effectiveness of co-operation tools in fostering investments and maximising their impact is a first step in this direction. And, ensuring there is coherence between investment, trade and development co-operation benefits both the EU and the region. The EU’s Global Gateway Investment Agenda (GGIA) is a good example of this. In its 360° approach, GGIA helps attract FDI, enhances the enabling environment of LAC countries and promotes impact-driven investments, complemented by Team Europe Initiatives, such as the EU–LAC Digital Alliance and Inclusive and Equitable Societies. Together, these efforts enable the EU and its partners to deploy FDI as a catalyst for inclusive, sustainable and innovation-led development in LAC.
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