Empowering growth: The opportunity in Latin America’s energy infrastructure

Many existing grids were designed for a one-way flow of power from central power plants. The integration of distributed solar panels, batteries, and electric vehicles introduces complexity that older grid equipment struggles to manage. Weather resilience is another factor testing grid durability, with weather-related events accounting for 80% of major outages in the U.S. since 2000.¹

In response to these challenges, the U.S. Department of Energy has announced significant funding opportunities to enhance grid resilience and capacity. On October 18, 2023, the Department announced up to $3.46 billion in Grid Resilience and Innovation Partnerships (GRIP) Program investments, including 16 projects selected under Grid Resilience Utility and Industry Grants. A year later, on October 18, 2024, an additional US$ 2 billion was allocated for 38 projects aimed at protecting the U.S. power grid against extreme weather, lowering costs for communities, and increasing grid capacity to meet the growing demand from manufacturing, data centers, and electrification. While these initiatives are a step in the right direction, global spending needs are far higher to address the challenges faced by power grids worldwide.

Latin America’s energy infrastructure landscape

Latin America faces significant challenges in its energy infrastructure, losing 17% of its electricity during transmission and distribution - three times the rate of North America.² This loss is due to both technical issues, such as problems in transmission and distribution lines, and non-technical issues like theft and meter tampering. The World Economic Forum has highlighted this dynamic, noting that countries like Brazil, Mexico, Chile, and Argentina are notably lagging in their energy infrastructure development.

Despite these challenges, Latin America presents a wealth of opportunities. The region is rich in both fossil fuels and renewable resources, as well as critical minerals. According to the U.S. Geological Survey (USGS), the region is home to nearly half of the world's lithium reserves, over one-third of the global copper and silver reserves, one-fifth of the world's rare earth metals and more than 12% of the world's nickel reserves. On the oil front, Latin America contributes approximately 10 million barrels of oil per day, accounting for around 9-10% of the global oil supply. Venezuela alone holds the world's largest proven oil reserves, and collectively, the region has been a net exporter of crude oil for decades.

Investor interest in Latin America’s energy sector is strong, particularly in developing both extraction and transport infrastructure for traditional energy. In Argentina, J.P. Morgan recently agreed to lead a $2 billion US$ deal to support a greenfield oil pipeline connecting the Vaca Muerta oil basin in the western half of the country to the Atlantic Ocean. This deal involves over 85% of Argentina’s oil production , highlighting the rapidly developing energy story in specific pockets of Latin America. The pipeline would allow the country to transport its crude oil more efficiently and cost-effectively, opening access to new markets that were previously not feasible. This dual nature of energy investments in both traditional and renewable energy sources is expected to be a persistent theme in the coming decades.

Capitalizing on Latin America’s renewable energy potential

While Latin American economies heavily rely on fossil fuels for generation, the region's electricity sector is among the cleanest in the world with renewables accounting for a significant 60% of the power mix - well above the global average.³ The region’s geographical features provide an abundance of renewable energy resources, including high-quality solar radiation, steady winds, and plentiful water for hydropower, as well as geothermal potential in the Andes.

Electricity demand in the region has grown 2.3% per year throughout the 2010s and demand is expected to grow 3.9% annually until 2030.⁴ This rebound reflects continued population growth and increased electrification. Unlike Europe or East Asia, Latin America’s population continues to grow steadily, driving demand.. On the other hand, developments like increased technology adoption will continue to drive this demand.

The data center market in Latin America is expected to double over the next five or so years, increasing from approximately US$5 to US$6 billion in 2023 to between US$8 to US$10 billion by 2029. ⁵Meeting this surge requires abundant and low-cost power. Thanks to the region’s plentiful renewables and capacity, the grids are clean and economical, benefitting from economies of scale. This results in low industrial tariffs that attract investment. For example, Brazil's average industrial electricity rate is about $0.128/kWh, Chile's is $0.153/kWh, and Paraguay has one of the world's lowest rates at $0.045/kWh, contrasting with higher rates in major data center markets like the U.S. ($0.148/kWh) and Germany ($0.286/kWh). These savings boost the financial case for construction-intensive projects such as data centers and grid upgrades.⁶

This surge in demand coincides with a profound transformation of the region’s energy mix. Historically, electricity generation relied heavily on large hydropower projects and fossil fueled thermal plants, with minimal wind and solar contributions. However, over the past decade, policy support and falling technology costs have driven a rapid expansion. Between 2015 and 2022, the region increased its renewable capacity by 51%.⁷ Today, wind farms sweep across Brazil’s northeast and Patagonia, while solar arrays dominate the Atacama Desert in Chile and spread across rooftops in Mexico.

Through the RELAC (Renewables in Latin American Countries) initiative, 16 countries have committed to achieving an 80% renewable electricity share by 2030.⁸ However, integrating such a high proportion of variable renewables presents operational and investment challenges, similar to those faced globally. This includes the need for quick establishment of backup sources such as gas and energy storage, greater regional grid interconnection to balance transmission needs, and smart grid technology to manage increasingly complex power flows. Significant upgrades to transmission and storage capacity will be essential to sustain momentum without compromising reliability. In short, Latin America is on the cusp of both rapid demand growth and deep decarbonization, a combination that could make it one of the most dynamic electricity markets in the world this decade, provided its infrastructure keeps pace.

Infrastructure gaps and solutions

Despite Latin America’s broad progress in energy generation, significant infrastructure gaps remain in transmission, distribution, and storage. In many countries, generation capacity has outpaced the transmission equipment needed to deliver that energy reliably to consumers. The result is a classic bottleneck dynamic, with consumers facing severe delays or curtailment due to an insufficiently developed grid.

There are numerous examples of this dynamic in action within Latin America. Chile serves as a cautionary tale in the power sector. Blessed with vast solar and wind capacity, the country has built so many renewable plants that it routinely produces more power than its grid can absorb at midday. This results in notable curtailment, or clean energy going to waste due to insufficient transmission infrastructure. In 2024, Chile curtailed approximately 5.9 terawatt-hours of renewable electricity, a 121% increase from the prior year.⁹ Inadequate grid investment remains a persistent challenge, not only in accommodating future wind and solar capacity but also in maximizing output from existing plants. Argentina provides another example, where large volumes of shale gas were stranded in Patagonia for years due to inefficient pipelines. The first phase of the Néstor Kirchner Gas Pipeline in 2023 significantly enhanced transport capacity from Vaca Muerta, helping to alleviate the nation’s energy trade deficit. Consequently, the country’s full-year energy trade surplus surged to $5.6 billion in 2024, buoyed by pipeline expansion and upstream activity.¹⁰

One of the primary reasons for these infrastructure gaps is the ownership structure of the power sector. While generation has seen considerable private investment, transmission and distribution remain largely dominated by state monopolies. Over the years, many Latin American countries have liberalized and attracted private capital into power generation. Independent power producers now contribute significantly to markets in nations like Brazil, Chile, and Peru. By contrast, transmission and distribution utilities have frequently remained under government control or have been less open to private participation. As a result, the wires side of the business has not kept pace.
 
A review by the Inter-American Development Bank found that most Latin American nations adopt a mix of public and private ownership for generation, but transmission and distribution tend to be predominantly public and often monopolistic. For example, the Mexican government’s Federal Electricity Commission (CFE) owns the transmission and distribution grid, and recent policy shifts have curtailed some private generation opportunities in favor of the state utility. Even in countries more open to private investment, transmission expansion can be slow due to lengthy permitting processes, right-of-way issues, and limited budgets of state utilities, causing delays in building new lines. The result is that renewable projects in remote areas can be ready to generate power, but the grid to transport that power lags - a scenario seen in southern Brazil and northern Chile, among others.

Without adequate storage, grids with a high proportion of renewables lack flexibility and are more prone to instability. Public policy and investment thus have a critical role to play in bridging these infrastructure gaps. The Inter-American Development Bank estimates that the region needs over US$ 577 billion in power sector investments by 2030 to meet demand growth, reliability standards, and climate goals. This figure includes approximately US$ 397 billion for new generation, transmission, and distribution capacity, plus about US$ 180 billion to replace or rehabilitate aging assets. In other words, beyond building new power plants, a substantial capital outlay is needed to upgrade transmission and distribution networks and incorporate storage solutions.

These investment requirements significantly exceed public sector budget capacities, implying a vital role for private capital and multilateral financing. From 2016 to 2020, private investors contributed about 75% of energy sector investment.¹¹ Going forward, the IDB and World Bank emphasize that regulatory reforms and policy certainty will be essential to mobilizing private investment for transmission and distribution infrastructure.

Private capital has enthusiastically responded to the power infrastructure opportunity in Latin America. Since 2018, more than $16.8 billion in private capital has been deployed across the region, with much of it directed towards energy projects.¹² Inflows of Foreign Direct Investment (FDI) in the region reached US$ 188.962 billion in 2024, marking a 7.1% increase from 2023, while many project announcements rose in light of the dire energy infrastructure need.¹³ As an example, in 2024, Macquarie Asset Management and ENGIE announced a partnership to invest in the construction of a 700-kilometer natural gas pipeline in the Yucatán Peninsula. This investment aims to enhance Mexico's energy infrastructure and support the region's energy transition. The partnership will double the natural gas transportation capacity for the Yucatán Peninsula, passing through the states of Chiapas, Tabasco, Campeche, and Yucatán. The project is carried out under a 30-year contract with the Mexican Federal Electricity Commission (CFE), enabling the transportation of natural gas to recently built combined-cycle plants by the CFE.

ExxonMobil, together with partners Hess (being acquired by Chevron) and CNOOC, has committed roughly US$ 55 billion to develop offshore oil resources in Guyana’s Stabroek Block.¹⁴ This investment covers six government-sanctioned projects centered on Floating Production, Storage, and Offloading (FPSO) units. Additionally, Enel announced in 2024 that it will invest $2 billion over the next three years in Colombia. This investment is aimed at contributing to Colombia's energy transition and infrastructure modernization. Enel's commitment includes upgrading distribution grids and strengthening the country's energy matrix. The company is a leader in the solar energy market in Colombia, supplying 34% of the energy to the National Interconnected System (SIN).¹⁵

Latin America’s energy future

The global demand for cleaner and more reliable energy continues to strain existing power and energy infrastructure systems, necessitating increased investments in new developments and modernization of current assets. Latin America is poised to be part of this trend, given the tension between its abundant natural resources and aging infrastructure, which is often controlled by the state. The region offers a promising opportunity for the development of both traditional and renewable energy infrastructure, driven by long-term growth factors such as urbanization, electrification, and digitalization, all within the context of a still-growing population.

Beyond Latin America, infrastructure—and real assets in general—serve as a buffer for portfolios against inflationary pressures, providing alternative cash flow sources. The alignment of a sustainable, long-term investment theme with the immediate opportunity to deploy capital reinforces our positive view on the essential role of infrastructure assets in diversified portfolios.

¹ American Society of Civil Engineers (ASCE). 2025 America infra report card.

² Inter-American Development Bank. The Energy Path of Latin America and the Caribbean. August 2022.

³ International Energy Agency. Latin America Energy Outlook 2023.

⁴ Inter-American Development Bank. The Energy Path of Latin America and the Caribbean. August 2022.

⁵ United Nations Development Programme. Data in the Clouds, Centers on the Ground: The Role of Data Centers in LAC’s Digital Future. April 15, 2025.

⁶ https://www.globalpetrolprices.com/electricity_prices/

⁷ Inter-American Development Bank. Energy Transition in Latin America and the Caribbean. March 06, 2024.

⁸ Inter-American Development Bank. Energy Transition in Latin America and the Caribbean. March 06, 2024.

⁹ Chile curtailed 6TWh of solar PV and wind power in 2024. January 13, 2025.

¹⁰ Reuters. Argentina logs largest energy trade surplus in 18 years in win for Milei. January 21, 2025.

¹¹ How open to private-sector involvement is the electric power industry in Latin America and the Caribbean?. August 05, 2022.

¹² World Bank Group. The Role of Private Capital in Shaping a Sustainable Future in Latin America and the Caribbean. September 08, 2024.

¹³ Economic Commission for Latin America and the Caribbean. July 17, 2025.

¹⁴ https://corporate.exxonmobil.com/locations/guyana/news-releases/11132024_500-million-barrels-of-oil-produced-from-guyanas-stabroek-block

¹⁵ https://www.enel.com/media/explore/search-news/news/2024/10/investments-renewable-energy-colombia