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The global finance industry has been undergoing a significant shift in recent years, with investment patterns showing a slow but steady pivot towards Low Income, Lower Middle Income, and Upper Middle Income nations, as classified by the World Bank. This trend is supported by data indicating that investment volumes in these economies have risen consistently, reflecting the potential growth and robust economic indicators in these regions. 

“Investors are increasingly looking away from the saturated investment markets in the US and Europe, where there are mostly too many investors chasing too few deals and turning to the relatively ‘greenfield’ investment markets in the Global South,” said Womble Bond Dickinson Partner Jackie Camp. Camp and her team have represented investors, including the U.S. government’s development finance institution, in approximately 200 global finance transactions.

“Businesses and projects that once attracted only governmental funds, NGOs, and charitable organizations are now attracting for-profit private investment as well,” she said.

Numerous factors are driving this transformation, including higher potential growth rates, the technological empowerment of new markets, the vast need for infrastructure in the Global South, the growing trend of impact investing (driving social and environmental change through investment), and more favorable regulatory environments in many Low, Lower Middle, and Upper Middle Income countries. 

However, it's important to note that while the trend for investment in these countries is increasing, it's also accompanied by higher risk. Political instability, economic volatility, and less mature legal and regulatory environments can pose significant challenges for investors. Investors increasingly need savvy legal counsel, with strong ties to the countries in question, to make these complex cross-border deals work for all parties. 

Political instability, economic volatility, and less mature legal and regulatory environments can pose significant challenges for investors. Investors increasingly need savvy legal counsel, with strong ties to the countries in question, to make these complex cross-border deals work for all parties. 

Where are the Growth Markets? And Growth Sectors?

One particularly encouraging development is that nearly every region of the world is benefitting from the changes in global finance.

China is a huge player on both sides of the investment equation. Despite being the world's second-largest economy, China is considered an Upper Middle Income country by the World Bank. It continues to be one of the largest markets for global investment due to its massive consumer base, growing middle class, and advancements in technology and infrastructure. But at the same time, Chinese investors are driving global investment to the Global South.

However, 2022 and 2023 saw a sharp decline in foreign direct investment (FDI) in China after four decades of growth. Rising tensions between China and the West have been blamed.  China’s top leaders are taking a more conciliatory approach, perhaps recognizing that bridges need mending.

The Kingdom of Saudi Arabia is increasingly emerging as a key market for global transactions. In 2016, the Saudi Arabian Government (SAG) announced its long-term transformation plans, titled Vision 2030. Under this roadmap the SAG has been aggressively pursuing initiatives to privatize, globalize, diversify, and modernize the country’s economy and society. These ambitious efforts have opened more opportunities for foreign investment across large swaths of the economy, including in the manufacturing, mining, renewable energy, construction, real estate, health science, technology, and tourism sectors (in addition to its traditional fossil fuels investments). The SAG also is making investments in several ‘giga-projects’ which include building futuristic (carbon neutral) cities and economic zones from the ground up.  The SAG seeks to leverage Saudi Arabia’s strategic geographic location to build a global logistics center, connecting Asia, Europe, and Africa with large-scale infrastructure upgrades to shipping ports, rail systems, water projects, and airports. As a result of these rapid developments and diversifications, Saudi Arabia has outperformed other MENA economies, and not surprisingly, FDI has risen significantly in recent years. In the same spirit of investment diversification, Saudi Arabia also is pursuing several foreign investments outside the kingdom.  

Latin American countries like Brazil, Mexico, and Colombia have been significant receivers of foreign direct investment (FDI). In 2022, Latin America and the Caribbean received more than $224 billion in FDI—an all-time record. 

In 2022, Latin America and the Caribbean received more than $224 billion in FDI—an all-time record. 

Womble Bond Dickinson Partner José Luis Vittor, the head of the firm’s Latin America Team, said, “Latin America is attracting significant and diverse foreign investment, particularly in the critical minerals, renewables, infrastructure, agriculture, and manufacturing sectors.”

Vittor pointed to “nearshoring” as one key factor driving investment opportunities in Latin America, particularly in El Salvador and Mexico. Due to geopolitical concerns, such as the wars in Ukraine and Gaza, many U.S. companies are looking to bring supply chains closer to home. This trend stands to benefit nations in Latin America and the Caribbean. 

He also said that other Latin American countries, such as Panama and Costa Rica, also will benefit from U.S. efforts to develop a regional semiconductor supply chain with countries that could support and change its current supply source to those in the same hemisphere. 

“The sectors traditionally attracting greatest investor interest, and that will continue to create opportunities, have been agribusiness, renewables, and hydrocarbons,” Vittor said.  “One of the contributors to the current business environment in Latin America is the growth in private equity and venture capital investments in innovation including e-commerce, IT, and FinTech. These sectors have had an average annual growth rate of almost four percent.”

As one of the fastest-growing economies in the world, India attracts significant global investment, especially in the technology, telecommunications, and manufacturing sectors. Its large population, political stability, and increasing purchasing power are significant draw factors. After a sharp decline in FDI during the Covid-19 pandemic, foreign investment once again is growing in India.

As one of the fastest-growing economies in the world, India attracts significant global investment, especially in the technology, telecommunications, and manufacturing sectors.

Southeast Asia, including countries like Vietnam, Indonesia, Malaysia, and the Philippines, also has been attracting increasing investment. Factors contributing to this trend include a young and growing population, increasing internet and smartphone penetration, improving infrastructure, and economic liberalization.

Many African countries are considered “frontier markets” (countries with smaller, less developed capital markets than traditional emerging markets) with significant growth potential. Countries like Nigeria, Kenya, Rwanda, and South Africa, with strong growth in sectors like technology, telecom, and finance, are attracting increasing investments. For example, Camp’s team recently worked on a cross-border financing project to electrify taxis and commercial vehicles in Rwanda and UK Womble Bond Dickinson Partner Charlie Reid’s team worked on a financing of farming and food supply chain infrastructure in Tanzania. 

Also, the Africa Continental Free Trade Area (AfCFTA) agreement is expected to boost intra-Africa trade and attract investments. Many investors are looking to Africa as “the next big thing” in global finance.

Many investors are looking to Africa as “the next big thing” in global finance.

Many global finance initiatives remain focused on green energy transition and renewable energy projects. Jeff Whittle, leader of Womble Bond Dickinson’s Global Energy and Natural Resources Team, said, “Energy companies and investors are seeking government incentives, tax credits, or backing to mitigate the investment risks, especially in unproven technologies and new infrastructure.”

A recent IEA report estimated that global investments in energy were around $2.8 trillion in 2023. Of that, more than $1.7 trillion went to clean energy, “including renewable power, nuclear, grids, storage, low-emission fuels, efficiency improvements and end-use renewables and electrification.” 

Whittle said other global finance trends he’s seeing in the Energy and Natural Resources Sector include:

  • Less emphasis on ESG from investors versus solid returns and risk management;
  • A global interest in financing for sustainability and circular economies. “But companies continue to struggle with how to track, trade, license, and transfer carbon credits within and outside of companies in transparent and ethical ways,” Whittle said. 
  • A larger role for private equity fund investment in oil and gas exploration and production. Private equity, however, continues to have strong interest in renewables for the right opportunity for high returns on the investment. 
  • Large multinational companies are finding funding and financing for renewable and energy transition projects, which enhance their core products and services, although in some instances at a higher cost of capital due to the risk.

Womble’s Denver Office Managing Partner Scot Anderson, the Co-Head of the firm’s Energy and Natural Resources Metals & Mining Subsector Team, said the energy transition is fueling global investment in critical minerals, such copper, lithium, nickel and rare earths.

“Some lenders and investors are willing to finance energy transition metal projects when they might not otherwise invest in mining,” Anderson said. 

He noted that lithium prices have dropped recently, based in part on some companies securing a lithium supply under long-term contracts as well as a slackening in the pace of EV manufacturing.  

“This low price environment is projected to remain in place until the end of 2025,” Anderson said. “But there is still far less lithium available from current production than is required to meet projected demand. Lower lithium prices appear to be only a temporary phenomenon.”

Latin America is home to more than 50 percent of the world’s lithium reserves, which bodes well for mining investment in that region. 

Latin America is home to more than 50 percent of the world’s lithium reserves, which bodes well for mining investment in that region. 

Camp said that investors increasingly are turning to investment funds as vehicles to diversify investment in a desired area.  

“For example, if an investor wants to invest in renewable energy in sub-Saharan Africa, rather than identifying and conducting due diligence on specific borrowers and projects in that area (with which they may have limited familiarity), they can elect to invest in a fund with that objective,” she said. “The fund then not only has the local specialists to identify and perform due diligence on potential portfolio investments, but the administrators needed to track and administer the investments as well.  And of course, it allows for diversification of risk among a greater number of investments than a single investor is likely to achieve on its own.”

“The good news is that investors have more opportunities than ever to grow their wealth, thanks to this shift to new markets,” said Womble Bond Dickinson Chair & CEO Betty Temple. “But navigating these opportunities requires legal counsel that understands both the industry as a whole and the clients’ specific business on more than a superficial level.” 

View our interactive International Project Finance map here.

International Project Finance Map

What Do Clients Need from their Outside Counsel?

Addressing these challenges requires market participants to employ effective policies, regulatory compliance and risk management strategies, and international cooperation.

In response, Womble Bond Dickinson is focused on two global sectors—Finance and Energy & Natural Resources. Both sector teams include attorneys and professionals in both the UK and U.S. with deep experience in a full range of subsectors.

Beyond just industry knowledge, companies need expertise in cultural norms. It’s important to have existing contacts in Low, Lower Middle, and Upper Middle Income nations, as well as a diverse team with local knowledge and relationships.

Addressing these challenges requires market participants to employ effective policies, regulatory compliance and risk management strategies, and international cooperation.

Companies also need legal counsel that understands how to navigate ESG (Environmental, Social, Governance) concerns, which are increasingly important to stakeholders. Camp said that in many cases, for-profit investors also need to be prepared to compromise some level of economic return for a degree of social return.  

“Internationally, that often means investing in Low, Lower Middle, and Upper Middle Income countries, different types of projects previously considered too risky for private investment, or both. Large private equity firms routinely offer dedicated impact investing funds and public corporations trumpet their social responsibility,” said Womble Bond Dickinson Partner Jill Davidson, who guides clients in complex international finance deals, often with an ESG component. 

She said, “As these two once-separate worlds of impact investing and commercial lending/investing move closer together on the continuum, with each investor having their own objectives, risk tolerance, and expected returns, investors need counsel who listens rather than pontificate, have an appreciation of that investor’s purpose, risk tolerance, and objectives, and who are globally aware but locally savvy—all while remaining practical and efficient.”  

Merrick Benn guides equipment finance companies and banks in complex international equipment financing transactions. He is a member of Womble Bond Dickinson’s Global Board—the entity responsible for guiding, managing, and fostering cooperation between the firm’s UK and U.S. operations.

Charlie Reid leads Womble Bond Dickinson’s London banking team and is a member of the firm’s Global Board. He has extensive experience advising lenders (banks, development finance institutions, funds, and other alternative lenders) and borrowers in a wide range of markets (including multiple jurisdictions across Africa).