Chile, Uruguay, Costa Rica, Mexico, and Panama have the most potential to attract foreign investors in Latin America, according to the 2021 Milken Institute Global Opportunity Index.
Chile received the highest ranking in the region due to its strong performance across all categories measured.
There are four factors that determine the attractiveness of a nation to foreign investors. “These factors include, for example, understanding whether existing institutions promote business activity, the strength of their macroeconomic frameworks, the reliability of their courts, and the degree of transparency in their institutions,” says Claude Lopez, the head of the Research Department at the Milken Institute.
Considering the report, Latin America performs well compared to other emerging economies in two key areas: 1) having a highly qualified and diverse workforce and 2) the breadth and depth of the region’s financial systems.
However, the region has some drawbacks, too. Some countries are a bit expensive and businesses cannot launch operations quickly. In some countries, corruption, labor regulations, and taxes are great impediments to business.
Instability in government policymaking and property and investor rights are the other issues. Another major challenge to foreign investors, the report says, is the lack of “a strong, transparent, and predictable legal framework, including a well-functioning” legal and judicial system.
Governments in the region are aware that foreign investment is critical to creating jobs and fostering innovation.