Written by Eugenio Sánchez, PhD Researcher at the Center for International Studies, Sciences Po Paris, and a Programme Sherpa for CFIS 25.
Investment Screening Mechanisms (ISMs) have proliferated rapidly in advanced economies over the past two decades, but Latin America now faces similar challenges as rising FDI in strategic sectors raises national security concerns. Most Latin American countries remain highly dependent on foreign investment to modernize their economies while simultaneously lacking adequate legal frameworks to address security risks from foreign ownership in sensitive sectors. This challenge is intensified by great power competition between China and the United States targeting the region’s strategic industries. This paper examines key design challenges Latin American countries will face when implementing ISMs, including defining strategic sectors, determining whether to screen greenfield investments, and establishing reviewing authorities. Three case studies – Argentina, Brazil, and Chile – reveal varying levels of preparedness. Argentina shows minimal regulatory development and limited political interest in ISMs. Brazil possesses the strongest existing FDI regulations and official documents identifying strategic sectors, though the legislative process toward ISM establishment has stalled. Chile, despite weak current regulations, demonstrates the strongest political commitment to establishing ISMs, explicitly acknowledging the importance of following US and European models. Success across the region will require raising political awareness, developing comprehensive economic security strategies, and balancing security imperatives with continued attraction of necessary foreign investment.