- The growth of Foreign Direct Investment (FDI) in Central America is driven mainly by profit reinvestment from transnational corporations already operating in the region, rather than by a strong wave of new capital inflows
Divergentes – Central America shows a highly diverse picture when it comes to FDI between 2024 and the first half of 2025. The region as a whole recorded 16.6% growth in 2024, with Costa Rica and Guatemala consolidating their positions as leaders; Nicaragua continues to serve primarily as a transit hub for investments, El Salvador is experiencing a dramatic shift fueled by improved security indicators, and Honduras faces a crisis of political trust.
A review and analysis of World Bank reports based on data from the main financial entities in Central America, along with findings from the Economic Commission for Latin America and the Caribbean (ECLAC), carried out by Divergentes between 2024 and the first half of 2025, shows that this growth is largely the result of reinvested profits by corporations already established in the region, rather than a genuine surge of new capital.
Companies already operating in Central America continue to show confidence in the region’s political and economic stability by reinvesting their earnings. However, injections of new capital remained stagnant, reflecting either a lack of interest or caution among new investors in setting up operations in the region.
Among the countries reviewed, Nicaragua ranked third in FDI in 2024 and showed a similar trend in the first half of 2025, but with a key peculiarity: its performance rests heavily on so-called “transit investments.” According to the Central Bank’s methodology, these are defined as investments that use jurisdictions like Nicaragua as platforms for channeling funds to their final destinations.
Reports from Nicaragua’s Central Bank note that FDI is registered “based on the shareholder’s residence rather than their nationality or ethnic origin.” This means that if a company is legally incorporated in a jurisdiction like Panama or Barbados, that jurisdiction is recorded as the origin of the investment, even if the parent company or ultimate owner resides elsewhere, as explained in a previous Divergentes report.
“This practice, common among multinational corporations seeking tax efficiency or specific operational structures, highlights the need for deeper investigation to uncover the complex corporate setups and the true nationalities behind these capital flows,” the Central Bank reports note. In other words, investment that officially comes from Panama or Barbados may in fact originate elsewhere.
The 16.6% growth in FDI across Central America is not the result of a broad-based boom, but rather a consolidation of existing operations. Companies that already know the terrain and have established successful ventures are doubling down on their bets.
Costa Rica Leads the Way
The year 2024 was historic for Costa Rica, which attracted a record $4.32 billion in FDI, up 14% from 2023. This consolidated its status as the region’s undisputed leader. The main driver of this growth was manufacturing, which accounted for a striking 67.4% of total investment. Far behind were tourism (13.9%), real estate (6.8%), and services (5.1%).
The Free Trade Zone regime was the key catalyst, attracting 64.3% of all FDI and growing 24% year-on-year. A particularly notable achievement was the surge in investment in Free Trade Zones located outside the Greater Metropolitan Area (GAM), which covers the industrialized and urbanized zones of San José, Alajuela, Heredia, and Cartago.
Guatemala attracted $1.69 billion in FDI in 2024, a 5.1% increase over 2023. The country’s investment profile is heavily service-oriented. The top sector was financial and insurance activities, representing 42.6% of total inflows ($722.1 million). This was followed by manufacturing (15.7%) and commerce and vehicle repair (14.8%).
FDI figures for Honduras in 2024 vary depending on the source. ECLAC reports relatively strong inflows of $1.3 billion, while data from the Central Bank of Honduras (BCH) shows a much lower figure of $993.9 million, representing a 7.7% decline from 2023.
The discrepancy likely stems from different accounting methods: ECLAC’s figures often include intercompany loans, while the BCH’s may focus more narrowly on equity investment and reinvested earnings. Indeed, reports note that reinvested profits were the most important component (74%), while intercompany loans skyrocketed by 921%, explaining ECLAC’s higher figure.
The investment climate in Honduras is shaped by two opposing narratives. On one hand, the government and its promotion agency, the National Investment Council (CNI), project a business-friendly environment with strong potential and active support for investors.
On the other hand, the U.S. Department of State’s 2024 Investment Climate Statement highlights legislative uncertainty, especially around the Employment and Economic Development Zones (ZEDEs), a lack of effective incentives, and operational challenges for U.S. firms.
The Honduran government’s public rejection of the report as “unilateral” and “subjective” only reinforced perceptions of disconnect with the international investment community. As a result, Honduras is viewed as a high-risk, high-potential market. Conflicting data and narratives fuel significant uncertainty.
Preliminary 2025 figures show a modest rebound. In the first half of the year, FDI rose 5.7% to $453.1 million, driven by new capital inflows from Belgium and Germany into the coffee sector.
El Salvador is pursuing a unique development experiment in the region, with drastic improvements in public security as its main lever to attract investment. Data from 2024 and 2025 show the first results of this strategy: a hesitant start followed by a positive rebound.
The year 2024 was a transitional one, with FDI falling 10.9% to $639.6 million. The year was marked by extreme volatility, including a net negative flow of FDI in the second quarter, meaning more capital left the country than entered. However, the second half of the year showed strong recovery.
Europe was the leading source of investment with $294.1 million, followed by the United States ($113.4 million) and Central America ($64.8 million).
El Salvador’s investment narrative focuses almost entirely on the dramatic improvement in security under President Nayib Bukele, a development accompanied by severe restrictions on civil liberties and the deterioration of the rule of law.
The 2024 data, particularly the negative flow in the second quarter, suggests that while the security situation improved, investors adopted a “wait-and-see” approach, delaying decisions until the sustainability of these changes becomes clearer.
The sources of capital flowing into Central America and Latin America continue to show clear patterns, though with some notable shifts. In 2024, the United States consolidated its position as the region’s largest single investor, accounting for 38% of total FDI.
In contrast, the European Union’s share (excluding financial centers like Luxembourg and the Netherlands) fell to 15%, its lowest level since 2012. A significant development is the growing role of intraregional investment: flows from Latin America and the Caribbean accounted for 12% of the total, making it the third-largest source of capital.
Returning to Nicaragua, the great mystery surrounding its FDI figures is the contribution of China, touted by the Ortega-Murillo regime as the country’s top strategic economic partner.
Central Bank data show that imports from China rose from $574 million in 2019 to $1.44 billion by the end of 2024. By contrast, exports to China amounted to just $47.2 million, representing only 1.1% of Nicaragua’s total exports that year.
Yet the supposed benefits of major Chinese-backed projects, such as the construction of Punta Huete Airport and a photovoltaic plant, remain shrouded in uncertainty.
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