Trade tensions, geopolitical uncertainty and high interest rates kept investors cautious, resulting in a 3% drop in global Foreign Direct Investment (FDI) in the first half of 2025 (1H25) , the United Nations Conference on Trade and Development (UNCTAD) revealed .
The decline was driven by developed economies, where cross-border mergers and acquisitions (M&A) fell 18% to $173 billion, according to the organization’s latest Global Investment Trends Report .
Overall, developing economies performed better, with flows remaining stable. “However, trends diverged by region. Capital inflows increased by 12% in Latin America and the Caribbean and by 7% in developing countries in Asia, but fell by 42% in Africa,” UNCTAD noted.
On the other hand, high borrowing costs and economic uncertainty continued to hold back investment in industry and infrastructure during the first half of 2025.
“Announcements of projects from scratch fell 17%, due to a 29% decrease in supply chain-intensive manufacturing , such as textiles, electronics and automotive, amid tariff uncertainty,” the analysis detailed.
Meanwhile, international project financing saw an 11% decrease in the number of transactions and an 8% decrease in their value.
The trend was more positive in developing economies, where project finance operations fell by only 2% after two years of sharp declines.
Meanwhile, the value of global investment in new plans increased by 7% , driven by major projects in Artificial Intelligence (AI) and the digital economy .
“The United States recorded $237 billion in new green infrastructure projects in the first half of 2025, a figure that almost equals the total for 2024 and quadruples the average for the first half of the previous decade. More than half of this value came from AI-related sectors, particularly semiconductors and data centers,” the UNCTAD report stated.
Investment projects related to the Sustainable Development Goals (SDGs) in developing countries fell by 10% in number and 7% in value at the beginning of 2025, following sharp declines in the previous year.
UNCTAD explained that internationally financed projects, including transport and utilities, remained approximately 25% below the decade average, while new construction infrastructure activity fell 31% in value and 25% in number, led by sharp contractions in Latin America and the Caribbean (-78% in value and -43% in number).
The United Nations report indicated that investment in renewable energy also weakened .
“Globally, international financing for projects in the sector fell by 9% in number and 10% in value. Global projects for new renewable energy installations also decreased by 55% in number and 21% in value. In developing economies, projects fell by 23%. In the least developed countries, the decrease was 31% in number and 18% in value,” he noted.
UNCTAD anticipated that geopolitical tensions, regional conflicts, economic fragmentation and efforts to reduce risks in supply chains will continue to affect capital flows for the remainder of 2025.
“Even so, the easing of financial conditions, the increase in mergers and acquisitions activity in the third quarter and the greater overseas spending by sovereign wealth funds could support a modest recovery by the end of the year ,” the agency estimated.
It is worth remembering that, during the second quarter of 2025 (2Q25), Mexico attracted a new all-time high in FDI, with 34 billion 265 million dollars , which meant an increase of 10.2% compared to the same period in 2024, when it was 31 billion 096 million dollars.
36% of FDI went to the manufacturing sector . “Financial services also stand out with 26.7%, followed by construction and mining with 7.6% and 7.2%, respectively,” the Ministry of Economy (SE) emphasized .
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