LatAm emerges as strategic global pivot on nearshoring, critical minerals
Rising global fragmentation and the green energy transition are transforming Latin America into a central hub for capital, as major economies compete for the region's critical minerals and manufacturing capacity.
Global investors and policymakers are recalibrating their strategies toward Latin America, recognizing the region as a decisive swing factor in the fracturing global economy. Shifting supply chains and great-power competition have elevated the region's strategic importance to levels not seen since the 1970s commodity supercycle. With the broader Global South projected to drive over 70% of global economic growth in the next five years, capital is increasingly viewing the region not merely for its resources, but for its strategic optionality.
At the center of this shift is a scramble for critical minerals. Latin America holds an estimated 50% to 60% of the world's lithium reserves, alongside roughly 40% of global copper production. As major economies race to secure supply chains for electric vehicles and grid storage, one European trade official noted that "the energy transition runs through the Andes," underscoring the EU's recent €45 billion investment pledge to the region.
This strategic value has triggered a wave of overlapping economic diplomacy. China has cemented itself as the dominant trade partner in South America, with 22 regional nations signing onto its Belt and Road Initiative. Washington is simultaneously using the Inflation Reduction Act’s sourcing requirements and a new tariff architecture to pull mineral exports toward US-aligned nations like Chile and Peru.
Parallel to the mining boom, the relocation of manufacturing closer to North American markets is accelerating foreign direct investment. Mexico has emerged as the premier nearshoring destination, leveraging the USMCA trade pact to capture post-pandemic surges in manufacturing and automotive capital. Central America is also capturing a larger share of diverted Asian supply chains, particularly in Costa Rica's fast-growing medical-device sector.
Divergent Regional Strategies
How individual governments capitalize on this momentum varies widely. Argentina under Javier Milei is aggressively courting Western capital through deregulation, while Brazil leverages its massive internal market to attract agribusiness and renewable energy capital. However, this geopolitical attention brings entanglements, as countries heavily reliant on Chinese demand may find their policy flexibility constrained.
Despite optimistic macroeconomic tailwinds, structural bottlenecks remain. The OECD and McKinsey warn that capturing the full potential of nearshoring will require urgent upgrades to regional infrastructure and regulatory frameworks. While JPMorgan Private Bank views the current environment as a temporary window of opportunity, realizing this potential will require immediate institutional upgrades to prevent a fleeting market episode.
