Trends in global FDI still exhibit the effects of the 2008 economic downturn. Worldwide FDI fell 14.3% in 2012 with associated capital investment down by a third. The Caribbean and Central American region continues to feel the impact of the downturn with inward FDI declining 28% last year. With many countries in the region depending heavily on financial services, tourism, commodities and funds from abroad, growth has remained relatively lacklustre with only a few countries, such as Costa Rica, Panama and the Dominican Republic, experiencing notable growth.

Costa Rica continued to attract investors thanks to its stable political and economic structures. According to fDi Markets, the country was the top destination in the Caribbean and Central American region in 2012, attracting almost one-fifth of total FDI projects. Costa Rica ranked highly in various categories including FDI Strategy, Business Friendliness and Labour Environment. Panama climbed the top 10 to place second in the biennial ranking. Although FDI into the country fell by 60% in 2012, the major expansion project of the Panama Canal combined with the 2012 enforcement of the free-trade agreement with the US is expected to boost and extend economic growth in the future. Placing third, the Dominican Republic is on track to surpass its results for 2012. Figures from fDi Markets show that the country has attracted 50% more FDI projects in the first five months of 2013 compared with the same period in the previous year.

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Caribbean and Central American Country of the Future best overall

Best economic potential

One of the world’s largest financial centres, well known for its tax advantages, the Cayman Islands is fDi's top Caribbean and Central American country in the Economic Potential category. With more registered businesses than people, the islands witnessed a 200% increase in FDI in 2012, albeit from relatively small base figures. 

Aiming to diversify its economy from its heavy reliance on the financial services and tourism sectors, the Cayman Enterprise City (CEC) was the first zone established under 2011 legislation to facilitate the development of special economic zones. The CEC targets knowledge-based companies in biotechnology, commodities and derivatives, information and communications technology, media, and academia. Between its inception in 2011 and May 2013, 46 companies have established a presence or signed up to the zone.

Bermuda ranked behind the Cayman Islands in second position for Economic Potential. The UK overseas territory has the highest GDP per capita of all locations analysed for fDi’s Caribbean and Central American Countries of the Future with its wealth largely down to the islands’ offshore finance industry. Following the global financial crisis, Bermuda joined the British Virgin Islands, Cayman Islands, Anguilla, Montserrat and the Turks and Caicos Islands in signing an agreement to tackle tax evasion by sharing information with the UK, France, Germany, Italy and Spain.

According to information collected by fDi Benchmark, Panama experienced the highest GDP growth of the region, enabling the country to rank third for Economic Potential. Panama’s GDP growth rates are forecast to remain higher than neighbouring countries, thanks not only to the canal extension, but also the continued success of the world’s second largest free zone, the Colón Free Trade Zone.

Barbados – education is key

Barbados has been awarded the top position in the Labour Environment category. Barbados has one of the highest literacy rates in the world thanks to free primary and secondary education, and free university education for nationals. The Barbadian government places significant emphasis on the development of human and social capital, dedicating about 20% of its annual budget to education. In its submission for fDi's Caribbean and Central America Countries of the Future, Invest Barbados states that the country has “a knowledge-able and reliable workforce which prides itself on excellence in service delivery”. 

As with Barbados, the UK overseas territory of Montserrat has an education system based on the UK model, with education compulsory to age 14 and free up to age 17. Montserrat placed in second for Labour Environment with Costa Rica in third. Home to the highest number of universities in the Caribbean and Central America region, Costa Rica has proven to be an attractive destination for companies in advanced manufacturing, life sciences, software and IT-enabled services sectors. According to Costa Rica’s investment agency, CINDE, there has been a shift towards a higher level of complexity of products manufactured, signalling “the quality of human capital and the growing confidence in the capabilities of Costa Rican plants to follow strict regulatory protocols”.

Trinidad and Tobago’s low costs

Trinidad and Tobago has overtaken El Salvador to be ranked as the most cost-effective location in the Caribbean and Central American region. An abundance of oil and gas reserves, accounting for about 40% of GDP and 80% of exports, make the country a wealthy nation compared with many of its neighbours. Cheap energy prices combined with low operating costs have attracted investors in low-cost industries. In its submission for the ranking, InvesTT states: “We know where our strengths are: the creativity of our people, low energy costs, core competencies in large-scale manufacturing.”

The highly industrialised country of El Salvador was positioned in second in the Cost-Effectiveness category. El Salvador offers a cost-effective export platform for investors involved in aeronautics, offshore business services, textiles and apparel. Ranked in third, Nicaragua’s cost-competitive structure is evident in its FDI track record. According to fDi Markets, more than half of all the country’s FDI recorded since 2003 has been involved in manufacturing and extraction activities.

Panama’s strategic position

Given the importance of the infamous Panama Canal as a key conduit for international maritime trade, it is unsurprising that the country has been awarded top of the Infrastructure category. Panama also lays claim to the largest number of airports in the Caribbean and Central American region and links the country directly to more than 60 international destinations.

The most visited destination in the Caribbean region, the Dominican Republic, offers extensive air and sea connectivity and continues to expand its rail and road networks. In third position for Infrastructure, Jamaica’s government has proposed to transform the island into a global logistics hub on the back of the expected increase in trade activity from the expansion of the Panama Canal. According to the submission by Jamaica Promotions Corporation, a “$8bn mega project is expected to attract huge capital investment in several transport and infrastructure projects”.

Puerto Rico to outperform 2012

Puerto Rico has maintained its position as the most business-friendly country in the Caribbean and Central American region. The country boasts the largest cluster of knowledge-based companies with more than 20 of theFinancial Times’ Top 500 Companies located there. Home to six ofThe Banker’sTop 1000 banks, Puerto Rico benefits from operating within the US jurisdiction while providing benefits of a foreign tax structure. In November 2012, Puerto Ricans voted for full membership of the US as the 51st state. Following this, inward FDI in 2013 is set to surpass figures for 2012 as one-fifth of FDI into the Caribbean and Central American region chose Puerto Rico as its destination.

Ranked second for business friendliness, part of Costa Rica’s success lies in retaining and developing relationships with existing investments. According to the latest data from fDi Markets, Costa Rica received more FDI expansions than its neighbouring countries in the region. Key target areas for growth include life sciences, advanced manufacturing and the IT sector. Among the fastest growing and best managed economies in the region, Panama climbed to third position in the Business Friendliness category.

Costa Rica tops strategy list

The prize for the Best Caribbean and Central American Country for FDI Strategy goes to Costa Rica. In its submission, CINDE highlights its strengths in FDI attraction, saying: “Costa Rica has taken advantage of its privileged location in the centre of the Americas, and through its web of free-trade agreements (with the US, Europe and China among others) has become a major manufacturing and services hub”. 

The Dominican Republic was positioned in second. With a total of 57 trading zones in operation and more than 533 companies, the National Free Zones Council of the Dominican Republic states: “When considering, availability of highly trained personnel, excellent transport infrastructure, a complete range of reliable services and facilities, outstanding geographical locations and competitive incentives, there is no wonder why the Dominican Republic is the location of the future.”

The judging panel awarded third place to Nicaragua for the best FDI Strategy. In its submission, PRONicaragua is gearing up for the future by “not only working on ensuring the success of companies already established in the country, but... also preparing to become the leading FDI destination in the region”.

Future opportunities

Although disparities still prevail in the performance of countries in the Caribbean and Central American region, many locations have benefited from finance, tourism and energy industries. Future opportunities for growth include the expected increase in trade resulting from the widening of the Panama Canal as well the increase in momentum of ‘nearshoring’, which may extend south of the Mexican border. The future for the region depends on how the countries capitalise on these opportunities while developing strategies to target emerging source countries and subsectors.

Click on the link below for a PDF version of the complete results:

Trends in global FDI still exhibit the effects of the 2008 economic downturn. Worldwide FDI fell 14.3% in 2012 with associated capital investment down by a third. The Caribbean and Central American region continues to feel the impact of the downturn with inward FDI declining 28% last year. With many countries in the region depending heavily on financial services, tourism, commodities and funds from abroad, growth has remained relatively lacklustre with only a few countries, such as Costa Rica, Panama and the Dominican Republic, experiencing notable growth.

Costa Rica continued to attract investors thanks to its stable political and economic structures. According to fDi Markets, the country was the top destination in the Caribbean and Central American region in 2012, attracting almost one-fifth of total FDI projects. Costa Rica ranked highly in various categories including FDI Strategy, Business Friendliness and Labour Environment. Panama climbed the top 10 to place second in the biennial ranking. Although FDI into the country fell by 60% in 2012, the major expansion project of the Panama Canal combined with the 2012 enforcement of the free-trade agreement with the US is expected to boost and extend economic growth in the future. Placing third, the Dominican Republic is on track to surpass its results for 2012. Figures from fDi Markets show that the country has attracted 50% more FDI projects in the first five months of 2013 compared with the same period in the previous year.

Caribbean and Central American Country of the Future best overall

Best economic potential

One of the world’s largest financial centres, well known for its tax advantages, the Cayman Islands is fDi's top Caribbean and Central American country in the Economic Potential category. With more registered businesses than people, the islands witnessed a 200% increase in FDI in 2012, albeit from relatively small base figures. 

Aiming to diversify its economy from its heavy reliance on the financial services and tourism sectors, the Cayman Enterprise City (CEC) was the first zone established under 2011 legislation to facilitate the development of special economic zones. The CEC targets knowledge-based companies in biotechnology, commodities and derivatives, information and communications technology, media, and academia. Between its inception in 2011 and May 2013, 46 companies have established a presence or signed up to the zone.

Bermuda ranked behind the Cayman Islands in second position for Economic Potential. The UK overseas territory has the highest GDP per capita of all locations analysed for fDi’s Caribbean and Central American Countries of the Future with its wealth largely down to the islands’ offshore finance industry. Following the global financial crisis, Bermuda joined the British Virgin Islands, Cayman Islands, Anguilla, Montserrat and the Turks and Caicos Islands in signing an agreement to tackle tax evasion by sharing information with the UK, France, Germany, Italy and Spain.

According to information collected by fDi Benchmark, Panama experienced the highest GDP growth of the region, enabling the country to rank third for Economic Potential. Panama’s GDP growth rates are forecast to remain higher than neighbouring countries, thanks not only to the canal extension, but also the continued success of the world’s second largest free zone, the Colón Free Trade Zone.

Barbados – education is key

Barbados has been awarded the top position in the Labour Environment category. Barbados has one of the highest literacy rates in the world thanks to free primary and secondary education, and free university education for nationals. The Barbadian government places significant emphasis on the development of human and social capital, dedicating about 20% of its annual budget to education. In its submission for fDi's Caribbean and Central America Countries of the Future, Invest Barbados states that the country has “a knowledge-able and reliable workforce which prides itself on excellence in service delivery”. 

As with Barbados, the UK overseas territory of Montserrat has an education system based on the UK model, with education compulsory to age 14 and free up to age 17. Montserrat placed in second for Labour Environment with Costa Rica in third. Home to the highest number of universities in the Caribbean and Central America region, Costa Rica has proven to be an attractive destination for companies in advanced manufacturing, life sciences, software and IT-enabled services sectors. According to Costa Rica’s investment agency, CINDE, there has been a shift towards a higher level of complexity of products manufactured, signalling “the quality of human capital and the growing confidence in the capabilities of Costa Rican plants to follow strict regulatory protocols”.

Trinidad and Tobago’s low costs

Trinidad and Tobago has overtaken El Salvador to be ranked as the most cost-effective location in the Caribbean and Central American region. An abundance of oil and gas reserves, accounting for about 40% of GDP and 80% of exports, make the country a wealthy nation compared with many of its neighbours. Cheap energy prices combined with low operating costs have attracted investors in low-cost industries. In its submission for the ranking, InvesTT states: “We know where our strengths are: the creativity of our people, low energy costs, core competencies in large-scale manufacturing.”

The highly industrialised country of El Salvador was positioned in second in the Cost-Effectiveness category. El Salvador offers a cost-effective export platform for investors involved in aeronautics, offshore business services, textiles and apparel. Ranked in third, Nicaragua’s cost-competitive structure is evident in its FDI track record. According to fDi Markets, more than half of all the country’s FDI recorded since 2003 has been involved in manufacturing and extraction activities.

Panama’s strategic position

Given the importance of the infamous Panama Canal as a key conduit for international maritime trade, it is unsurprising that the country has been awarded top of the Infrastructure category. Panama also lays claim to the largest number of airports in the Caribbean and Central American region and links the country directly to more than 60 international destinations.

The most visited destination in the Caribbean region, the Dominican Republic, offers extensive air and sea connectivity and continues to expand its rail and road networks. In third position for Infrastructure, Jamaica’s government has proposed to transform the island into a global logistics hub on the back of the expected increase in trade activity from the expansion of the Panama Canal. According to the submission by Jamaica Promotions Corporation, a “$8bn mega project is expected to attract huge capital investment in several transport and infrastructure projects”.

Puerto Rico to outperform 2012

Puerto Rico has maintained its position as the most business-friendly country in the Caribbean and Central American region. The country boasts the largest cluster of knowledge-based companies with more than 20 of theFinancial Times’ Top 500 Companies located there. Home to six ofThe Banker’sTop 1000 banks, Puerto Rico benefits from operating within the US jurisdiction while providing benefits of a foreign tax structure. In November 2012, Puerto Ricans voted for full membership of the US as the 51st state. Following this, inward FDI in 2013 is set to surpass figures for 2012 as one-fifth of FDI into the Caribbean and Central American region chose Puerto Rico as its destination.

Ranked second for business friendliness, part of Costa Rica’s success lies in retaining and developing relationships with existing investments. According to the latest data from fDi Markets, Costa Rica received more FDI expansions than its neighbouring countries in the region. Key target areas for growth include life sciences, advanced manufacturing and the IT sector. Among the fastest growing and best managed economies in the region, Panama climbed to third position in the Business Friendliness category.

Costa Rica tops strategy list

The prize for the Best Caribbean and Central American Country for FDI Strategy goes to Costa Rica. In its submission, CINDE highlights its strengths in FDI attraction, saying: “Costa Rica has taken advantage of its privileged location in the centre of the Americas, and through its web of free-trade agreements (with the US, Europe and China among others) has become a major manufacturing and services hub”. 

The Dominican Republic was positioned in second. With a total of 57 trading zones in operation and more than 533 companies, the National Free Zones Council of the Dominican Republic states: “When considering, availability of highly trained personnel, excellent transport infrastructure, a complete range of reliable services and facilities, outstanding geographical locations and competitive incentives, there is no wonder why the Dominican Republic is the location of the future.”

The judging panel awarded third place to Nicaragua for the best FDI Strategy. In its submission, PRONicaragua is gearing up for the future by “not only working on ensuring the success of companies already established in the country, but... also preparing to become the leading FDI destination in the region”.

Future opportunities

Although disparities still prevail in the performance of countries in the Caribbean and Central American region, many locations have benefited from finance, tourism and energy industries. Future opportunities for growth include the expected increase in trade resulting from the widening of the Panama Canal as well the increase in momentum of ‘nearshoring’, which may extend south of the Mexican border. The future for the region depends on how the countries capitalise on these opportunities while developing strategies to target emerging source countries and subsectors.

Click on the link below for a PDF version of the complete results: