From commodities to green hydrogen: BBVA investment options in Latin America
Juan Ruiz, chief economist at BBVA Research in Latin America, identifies three strategic areas with the potential to attract investment in the region: domestic demand, commodities, and clean energy.
Bloomberg Line — BBVA (BBVA) believes Latin America has the potential to attract more investments aimed at addressing the needs of the middle class, while also considering the region to have more opportunities in strategic metals for the energy transition and green hydrogen.
In a changing global economic cycle, Latin America offers investment opportunities that go beyond traditional financial markets, BBVA Research chief economist Juan Ruiz told Bloomberg Línea.
According to figures from the Economic Commission for Latin America and the Caribbean (ECLAC), foreign direct investment (FDI) in Latin America and the Caribbean totaled US$188.962 billion last year, representing a 7.1% increase over the previous year.
The countries that received the most foreign direct investment inflows last year were Brazil (accounting for 38% of the total) and Mexico (24%), followed by Colombia, Chile, and Argentina.
ECLAC, concluded:
The region still needs to improve its FDI attraction policies and align them with its productive development policies, thereby increasing the level of FDI reaching the region and its impact on host economies,
Juan Ruiz, emphasized:
We are in a context in which we are recovering these levels of per capita income; we are recovering a little more of the purchasing power of the middle classes, which was severely affected after 2015,
In this sense, he believes there is room for growth in investments aimed at serving the local population, especially with a focus on the growing middle class.
Strategic commodities:
Ruiz emphasized that metals linked to the energy transition and food will continue to be key sectors.
He said,
It will continue to be a highly competitive sector in the region,
According to the ECLAC report, Latin America and the Caribbean constitute a “leading region” in the global market for critical minerals.
An example of this is that between 2005 and 2024, 1,152 announcements of foreign direct investment projects in the minerals and metals sectors in the region were registered, totaling US$230,065 million.
24% of the total number of projects were for critical minerals.
Furthermore, 84% of the total value of these ads was concentrated in Chile, Peru, Brazil, and Argentina.
Clean energy for export:
Latin America, economist Juan Ruiz noted, has a “very clean energy matrix” due to the importance of hydroelectric generation, which gives it an advantage for green energy export projects.
He, added, citing green hydrogen projects aimed at markets like Europe as an example,
The generation of clean, green energy for export could be another area where the region has a comparative advantage,
In Chile, for example, green hydrogen-related projects totaled US$25.617 billion in investments last year, according to data reported by the government agency InvestChile. This renewable energy was one of the drivers of foreign direct investment in 2024.
BBVA Research’s chief economist in Latin America, said:
If we’re going to talk about risks, I would divide them in the short term between internal and external risks,
Among the clearest external risks for the region, he mentioned uncertainty about economic policy in the United States, especially in terms of trade.
This uncertainty has two effects: on the one hand, the direct impact —considering Mexico as the most exposed country—and, on the other, the indirect impact through volatility in financial markets, which ultimately affects the entire region.
Furthermore, in an environment of uncertainty like this, it’s very difficult for companies to be encouraged to make significant investments, according to Juan Ruiz.
This postponement of investments is being seen not only in the United States, but also in countries that could be affected by this policy.
The other significant external risk is the possibility of a resurgence of inflation in the United States as a result of the tariffs.
In that case, I would expect the Federal Reserve to react with a tightening of international financial conditions.
Preference for assets in local currency
Ruiz said in an interview,
I think there will be a certain tendency toward a strengthening of local currency assets in Latin American countries against the dollar,
This approach comes amid global weakness in the dollar, which saw it record its worst six-month period since 1973 in the period ending in June.
The US dollar index DXY has fallen by -9.45% so far this year, as of Friday, July 18 at 12:00 p.m.
However, analyst Juan Ruiz warned that the attractiveness of these assets depends on the type of investor.
He, explained:
A European investor, given the strength of the euro against the dollar, will probably not see this appreciation of Latin American currencies fully offset,
On the other hand, “an American investor probably does see some value in local currency assets in the region.”
READ the latest news shaping the hydrogen market at Hydrogen Central
From commodities to green hydrogen: BBVA investment options in Latin America, source
