Editorial | Foreign Direct Investment and CARICOM

Not much has been made in Jamaica of the latest World Investment Report (WIR) or its offspring analysis of foreign direct investment (FDI) in the Caribbean.

However, the Caribbean Investment Report (CIR) deserves serious attention from regional governments, especially its promotion of greater intra-Caribbean investments and call for collaboration among regional countries in attracting FDI.

“The constraints associated with small, fragmented markets could be addressed by facilitating cross-border investment projects and strengthening regional investment promotion efforts,” said the CIR, produced by the United Nations Conference on Trade and Development (UNCTAD) as a corollary to its FDI report for 2025.

This newspaper shares those conclusions, which are consistent with efforts by the Caribbean Community (CARICOM) to evolve into a single market and economy. Indeed, CARICOM should convene a special conference of its trade, investment and finance ministers to review the findings of the CIR and to accelerate the removal of all remaining frictions to intra-CARICOM investments and the coordination of FDI strategies. The community might also consider expanding this arrangement to other regional countries, similar to its arrangement with the Dominican Republic (DR) in CARIFORUM for a free trade agreement with the European Union (EU).

According to the WIR, global foreign direct investment reached US$1.6 trillion in 2025, a six per cent increase when compared with 2024. However, when flows through major financial centres and investment hubs were excluded, the report noted, FDI increased by four per cent, after two consecutive years of decline.

PASS-THROUGHS

With respect to the Caribbean, FDI, including flows into off-shore financial centres (OFCs), was US$97 billion in 2025, a 10 per cent increase over the previous year. However, when the OFCs – the vast bulk whose recorded FDIs are likely to be pass-throughs rather than intended for the benefit of the domestic economy – are excluded, foreign direct investment to the Caribbean was US$18 billion, nine-and-a-half per cent of the amount destined for Latin America and Caribbean (LAC).

But those flows were not even. As the CIR analysis highlighted, 85 per cent of the non-OFC FDI went to only two Caribbean countries, Guyana and the Dominican Republic (DR) – US$9 billion and US$5 billion, respectively. Suriname, which, like Guyana, is enjoying significant oil-related investment, was third with US$2 billion.

Stated differently, Guyana received approximately half of the Caribbean’s non-portfolio FDI last year, while the DR, where capital went to a wider range of businesses, got nearly 28 per cent. Suriname’s portion was 11 per cent. Moreover, in absolute dollar terms, the flows to Suriname more than tripled, when compared with 2024.

Jamaica’s share of the region’s non-OFC FDI was roughly US$351 million, or around 1.5 per cent of the island’s GDP. In contrast, the FDI flows in Suriname and Guyana, which, like Jamaica, are members of CARICOM, were, respectively, the equivalent of 45 per cent and 35 per cent of their GDPs.

RELATIVELY MODEST

Beyond the three big Caribbean recipients (Guyana, Dominican Republic, Suriname), the flow of net FDI elsewhere in the Caribbean was relatively modest, with Trinidad and Tobago experiencing disinvestment in 2025 of US$1.2 billion, following its negative FDI of US$453 million the previous year. In Trinidad and Tobago’s case, the figures indicate that either foreign firms sold subsidiaries and repatriated the earnings, sent home accumulated dividends rather than investing them locally, or paid back inter-company loans or advances to parent companies to a greater extent than new FDI into the economy.

In most cases, though, FDI intensity, net inflows relative to GDP, remained largely the same as the previous year, except for St Kitts and Nevis, where flows, as a proportion of GDP, have topped three per cent, and Belize, where the fall was from five per cent to one per cent of GDP. In small economies, however, even relatively small FDI flows, and investment from any source, can have a substantial impact on domestic output. This makes what happens in this regard to the small island developing economies of the Caribbean worthy of significant attention.

So, often, is the impact of greenfield investments, where new projects are undertaken, rather than additional capital flowing to ongoing developments or existing enterprises. In that respect, the US$4.7 billion earmarked for greenfield projects, a 33 per cent increase on 2024, was welcomed, even if 93 per cent of the amount went to three economies - Trinidad and Tobago, Dominican Republic and Guyana – with most directed to oil and gas projects.

PERFORMANCE ISN’T STELLAR

While the region isn’t at the bottom of the barrel with respect to FDI flows, its performance isn’t stellar. And, faced with the global volatility of the past decade, the need to build out resilient infrastructure to adapt to the climate crisis, and an insufficiency of affordable loans to address the crisis, Caribbean countries have to think of new and creative ways to bring private capital to the region to meet some of those needs and to grow their economies. This ought not to result in a race to the bottom as each country tries to outdo the other to entice capital.

In some instances, cross-border cooperation makes sense. Or, as the CIR said: “Regional and international partnerships will remain important for the Caribbean’s investment prospects. While developed economies continue to be the main source of investment, investors from developing economies are playing an increasingly important role. At the same time, intra-Caribbean investment remains limited relative to the region’s size and potential. Deeper regional investment integration could support the development of regional value chains, expand opportunities for Caribbean firms, and enhance the region’s attractiveness as an investment destination. The constraints associated with small and fragmented markets could be addressed by facilitating cross-border investment projects and strengthening regional investment promotion efforts.”