How will a shifting economic and regulatory landscape affect growth in South America in 2025?

Economic forecasts predict steady but slow growth, averaging around 2% of GDP across South America in 2025. Given the region’s abundant natural resources, strategic geographical positioning and growing workforce, that is perhaps an underperformance. But political and economic instability, and a history of corruption have long hampered South America’s attractiveness to investors.

Buoyant sectors

For some time, potential investors in the region have been grappling with political shifts which can quickly transform the attractiveness of a jurisdiction. This risk compounds existing issues including sluggish economic growth, corruption concerns and social unrest which have acted to deter investors.

However, despite these systemic challenges, there are certain sectors which remain largely buoyant. The region is mineral rich and has a strong history of mining; particularly copper, iron and gold. The Triángulo del Litio (Lithium Triangle) spans the borders of Bolivia, Chile and Argentina and is reported to hold between 56% and 68% of the world’s lithium supplies. The continent has remarkable reserves, ample arable land and a prosperous agriculture industry.

South America has also seen huge investment opportunities in the renewable energy sector. The traditional renewable energy industries (wind, solar, hydro) have grown in the past decade and there is now a focus on the next steps (including energy storage technologies, hydrogen, and batteries). As in the renewables sector, there is increasing focus on innovation. The past decade has seen increased attention on newer industries including data centres, open banking, and the establishment of tech hubs.

However, in certain jurisdictions there are regulatory and infrastructure challenges that have thrown up obstacles to investment, whilst there are also ongoing concerns regarding local communities and the treatment of workers.

ESG

Indeed, those concerns about local communities and the treatment of workers are only two of a plethora of issues at play under the ESG umbrella. Issues including deforestation and the rights of indigenous communities are entrenched in the culture and legal systems of the various nations. The struggles between indigenous communities and those wanting to exploit the region’s lithium supplies have been well documented. Activities in the Triángulo del Litio have sparked protests akin to those in response to mining activities which have been seen across the continent for years. 

ESG, which is increasingly integral in the investment process, often encourages investors to assess the wider ramifications of transactions at the outset. It is accordingly vital that investors conduct a full life cycle assessment, including engaging with local communities, and consider the extensive gamut of environmental, social and governance issues for each project (displacement, land ownership, human rights, employment, communities, water, waste, environmental, nature and biodiversity to name but a few).

US policy will undoubtedly have knock on effects on the region, whether this is through the administration’s direct foreign policy agenda, or the indirect effects of US policy towards China.

In addition to the renewables opportunities mentioned above, climate change is a focus area as Brazil prepares to host the upcoming COP 30 in November. The hosting of high profile international summits often acts to focus the minds of hosting nations. At the date of writing, Brazil is one of a handful of nations prioritising the adoption of the ISSB reporting standards: both sets of standards will be adopted in full from January 2026.

The 16^th Biodiversity COP was also hosted on the continent, taking place in Cali, Colombia in October 2024. Colombia is one of the most biodiverse countries in the world, which made it a fitting host. Some of the most significant outcomes related to the role of Indigenous Peoples and Local Communities (IPLCs) in preserving biodiversity, including the formalisation of a permanent subsidiary body to enhance the engagement of IPLCs. 

External factors

External factors also need to be reckoned with. Issues ranging from dwindling copper prices to climate change-related weather events will all have an effect. There has been substantial speculation regarding the impact that the new US administration will have in the wider region, with a focus on Trump’s new tariffs, and in particular the impact on Mexico. US policy will undoubtedly have knock on effects on the region, whether this is through the administration’s direct foreign policy agenda, or the indirect effects of US policy towards China.

China has substantially increased its activity over the past decade, including strategic investments in the lithium industry. Xi Jinping travelled to Lima for the APEC Economic Leaders Meeting in November 2024. The location was apt given China’s sizable investments in Peru in recent years, including the announcement of the “mega port” in Chancay. The Peruvian government amended its laws to allow the port to be operated as a private concession which has raised concerns about Chinese influence in the region. Brazil has been another huge recipient of Chinese investment, with close ties between the nations and active trade deals. 

Ultimately, historic investment barriers and regulatory challenges may continue to deter some investors in the short term, with growth remaining slow. But growth has also been steady, and the strength of the opportunities in the region shouldn’t be overlooked. The prominence of ESG is reforming the global investment climate, which could have a huge impact on a continent where a holistic approach to projects is critical. Indeed, if done well, investors, nations and communities can leverage their common strategic purposes and shared cultural goals to great effect.