Investment and infrastructure barriers ETI results indicate that unfavourable investment and financing conditions are among the region’s greatest transition challenges. Turning policy into impact requires successfully scaling investment, particularly in the infrastructure and innovation systems that underpin a resilient, inclusive and sustainable energy transition. However, the region scores 31.1% below the global average for the finance and investment dimension, its largest gap in the ETI. Despite nearly $16.4 billion in private capital mobilized since 2018, investment remains far below what is needed.37 In 2024, LAC accounted for only 5% of global private clean energy investment,38 and just 4% of total global energy transition capital.39 Around 55% of the 2024 energy investments are in fossil fuel supplies, with 35% in the power sector and 10% in end-uses.40 Structural barriers, including high financing costs – the region’s weighted average cost of capital (WACC) for renewables is around 6.9%, well above Europe’s 4.4%41 – weak credit ratings, limited de-risking tools and project bankability challenges continue to restrict both public and private capital flows. High interest rates and short debt maturities further elevate investor risk perceptions, constraining large-scale financing – particularly for grid infrastructure. Limited financial investments reflect not only transition-specific hurdles but also the broader macroeconomic and business environment – from high global interest rates, fiscal constraints and sovereign risk profiles to foreign investment restrictions and burdensome business regulations. There is therefore an opportunity to improve investment conditions and implement innovative ways to de-risk investments in order to unlock more domestic and foreign capital in the energy sector. This investment gap is most visible in infrastructure. While the region has made gains in electricity access and renewables capacity, the ETI shows that overall progress has been limited (2% increase over the past decade). Outdated transmission networks, fragmented transport systems and low levels of digitalization are constraining integration, reliability and system-wide flexibility. Projects are often delayed by regulatory hurdles and financing bottlenecks, particularly in countries with limited fiscal space or weak enabling conditions. Without a step-change in de-risking mechanisms, regulatory consistency and access to affordable long-term capital, the region’s ability to scale investment in clean energy and infrastructure will remain constrained. Yet, countries like Brazil, Chile, Uruguay and the Dominican Republic are demonstrating what’s possible. Brazil’s 2024 transmission auctions successfully mobilized nearly $4 billion and resulted in around 6,500 km42 and 850 km43 of new transmission lines – offering a replicable model for other countries in the region. Chile addressed some of these issues as it electrified urban transport (case study 1), and Uruguay and the Dominican Republic did so in order to expand renewable electricity generation (case study 2 and 7). Alongside grid-focused investments, the region is seeing rapid growth in green and sustainable finance. Since 2014, more than $250 billion in green, social and sustainability bonds have been issued in LAC, including $20 billion in 2024 alone.44 Innovation and human capital At the same time, the region’s ability to innovate and adapt is being held back by gaps in human capital and technology readiness. LAC ranks among the lowest globally for both education and human capital and innovation readiness, with more than 4% declines in both dimensions over the past decade. While renewable energy deployment is creating new jobs – over 508,000 in 2023,45 especially in biofuels – science, technology, engineering and mathematics (STEM) education, vocational training and workforce reskilling remain underdeveloped. Only 17% of higher education graduates in the median country hold a science, technology, engineering and mathematics (STEM) degree and gender gaps further constrain the talent pool.46 The reskilling of those employed in fossil fuel sectors like coal and community engagement will be especially important for ensuring an equitable transition (case study 6). Meanwhile, clean tech R&D remains underfunded and most innovations fail to scale, reflecting limited commercialization support and a lack of industrial partnerships. Countries like Brazil have also looked to reducing bureaucratic and regulatory barriers in order to drive clean technology rollout (case study 3 and 9). In short, the region has strong transition intent, which must now be matched by targeted investment in infrastructure and strategic action on innovation and skills. Without addressing these interconnected readiness gaps, LAC risks falling short of its energy and climate ambitions – not because of a lack of vision, but because of a lack of delivery capacity. Energy Transition Readiness: Latin America and the Caribbean 17

Latin America&Caribbean Energy Transition 2025