Panama has lost its position as the leading destination for foreign investment in Central America and the Caribbean. The country now trails the Dominican Republic and Costa Rica, which are attracting billions in new capital for manufacturing, renewable energy, and tourism projects. This shift, confirmed by 2025 financial data, signals a major reconfiguration of the region’s economic landscape as nations compete for a share of global capital.
Before the pandemic, Panama consistently led the region in attracting Foreign Direct Investment. It drew $4.75 billion in 2018 and another $3.89 billion in 2019. The country’s post-pandemic recovery, however, has been marked by high quarterly volatility and a heavy reliance on profit reinvestment from existing companies rather than new projects. This dependence contrasts sharply with the strategies of its regional competitors, who are successfully marketing themselves for fresh capital.
“Panama has not managed to recover, after the pandemic, its regional leadership in capturing FDI.” [Translated from Spanish]
Officials across the region are intensifying their efforts to attract these crucial financial flows. They recognize foreign investment as a primary engine for job creation, technology transfer, and economic growth. This competition unfolds against a complex global backdrop of high interest rates and a significant reshuffling of Global Value Chains.
The Dominican Republic Emerges as Regional Magnet
The most dramatic evolution belongs to the Dominican Republic. It has solidified its status as one of the region’s top investment recipients. By the third quarter of 2025, the country had accumulated flows close to $4 billion. Its performance was particularly strong in the first half of the year, when it captured $2.89 billion, a year-on-year increase of 15.3% according to the Central Bank of the Dominican Republic.
Authorities project the 2025 year-end total will reach approximately $4.8 billion if current trends hold. Foreign capital in the Dominican Republic concentrated mainly in tourism, free trade zones, manufacturing, and renewable energy. The renewable sector showed sustained growth, rising from 7.5% of total FDI in 2019 to nearly 25% in 2025. This surge is supported by a stable regulatory framework and an active investment promotion policy.
Costa Rica Maintains Steady Growth in Key Sectors
Costa Rica, while experiencing more moderate growth, maintains a solid position. By the third quarter of 2025, the country had accumulated $3.53 billion in FDI flows. This figure represents a 4.5% increase compared to the same period in 2024. Manufacturing concentrated more than 80% of the investment received, totaling $2.86 billion.
Key sectors driving this growth include medical devices, semiconductors, and other segments linked to the knowledge economy. The United States remained the primary origin of foreign capital in Costa Rica, accounting for 54% of the total. Officials noted greater diversification, however, with investments coming from Mexico, the Netherlands, and Spain. The country attracted at least 55 new FDI projects during 2025.
Mixed Results Across the Rest of Central America
Other nations in the region presented a mixed picture. Guatemala showed positive evolution. It captured $867.3 million in foreign direct investment during the first half of 2025, an annual growth of 11%. Official projections point to a year-end total exceeding $1.86 billion, with expectations of reaching $2.05 billion in 2026.
Nicaragua’s behavior was less dynamic. During the first half of 2025, FDI reached $1.43 billion. This represented a drop of 15.8% compared to the same period the previous year. Panama figured as the main country of origin for FDI in Nicaragua during that period, with $247 million. That amount equates to 30.2% of Nicaragua’s total, followed by the United States and Barbados.
Honduras presented a mixed performance. In the first half of 2025, FDI reached $500.4 million. This was driven mainly by the reinvestment of profits in finance, insurance, and maquila manufacturing. The third quarter, however, showed a noticeable deceleration. New investment announcements became scarce, highlighting a vulnerability similar to Panama’s reliance on existing capital.
Panama’s Path to Regaining Competitiveness
The regional data paints a clear challenge for Panama. Its competitors are not just attracting more money, they are attracting different kinds of money. New greenfield projects in renewables and advanced manufacturing bring fresh capital, create construction jobs, and often introduce new technologies. Over-reliance on profit reinvestment, while valuable, can signal to the market that a country is not generating new appeal for international investors.
Analysts suggest Panama must reassess its value proposition. The country’s traditional strengths in logistics and finance remain powerful. Competing effectively now requires leveraging those strengths while also developing compelling offers in emerging sectors. Success depends on clear, stable policies that reduce perceived risk for multinational corporations looking to nearshore operations.
This regional reshuffling extends beyond spreadsheets. It influences job quality, technological advancement, and long-term economic resilience. The nations that succeed in attracting diverse, high-value investment will likely see faster recoveries from global economic shocks. They will also integrate more deeply into the high-value segments of international production networks.
The coming years will test the effectiveness of national strategies. For Panama, the task involves moving beyond its historical advantages to build new ones. The progress of neighbors like the Dominican Republic, with its booming renewable sector, and Costa Rica, with its advanced manufacturing base, provides both a benchmark and a sense of urgency. The competition for global capital is a defining feature of modern economic development in Central America, and the map is being redrawn in real time.