Latin America and the Caribbean (LAC), a diverse region of more than 30 countries, accounted for 7% of the world’s GDP in 2023, while income per capita is slightly below the world average. LAC countries have generally been prone to high inflation, high debt and fiscal issues, although sovereign credit ratings vary from debt in default (Venezuela) to upper-medium grade (Chile). LAC had a period of slow growth the past decade, where the region’s GDP expanded at about one-third of the average global pace. This partially explains why energy investment has been relatively low.

Fossil fuels represent two-thirds of the energy mix, well below the world average of 80%. The use of coal is quite low, but oil use –mainly for transport but also for industry – is relatively high, despite a share of biofuels in road transport that is twice the global average. The use of renewable energy has been central to LAC, where renewables represent a 60% share of the power mix (double the world average). LAC has a legacy of strong use of hydropower for electricity production, with many large dams built long ago. While its growth prospects are limited, hydro remains important for flexibility. There has been strong momentum for clean investments in parts of the region, and spending in fossil fuels has also risen in recent years. LAC’s overall ratio of clean energy to fossil fuels investment just under half the 2023 global average.

Energy investment is set to reach USD 185 billion in 2024, a record high. The power sector accounts for over 35%, while fossil fuels supply represents almost 55% and end-use less than 10%. Renewables and storage continue their strong growth, with solar leading on deployment (including small-scale projects), investment in storage accelerating in Chile (to reduce transmission bottlenecks) and even offshore wind picking up in Brazil and Colombia. Many countries are also developing long-term hydrogen strategies and implementing pilot projects, especially in Brazil (where a 1.2GW plant obtained environmental permits in late 2023) and Chile. Investment in the end-use sectors is low: Less than a third of LAC countries have minimum energy performance standards for industrial motors or household appliances, for example, and few have implemented mandatory building codes.   

Almost half of the 33 LAC countries pledged to reach net zero emissions by 2050, including Brazil, Chile, Costa Rica and Colombia. Average annual clean energy investment over the 2026-2030 period needs to increase four-fold compared to the preceding decade in order to get on track for these goals, which would result in fossil fuel consumption peaking this decade. Efforts to reduce the cost of capital will be critical, and will require improving the economic proposition for clean investments while also reducing macroeconomic risks.