Japan’s Investments in Latin America: Navigating Opportunities and Preventing Disputes

As a major supplier of agricultural commodities, lithium, and other critical minerals and metals, Latin America—comprising more than a dozen countries—occupies a strategic position in global supply chains. Latin American economies’ dependence on commodity exports presents significant opportunities for Japanese investors, positioning Japan as an alternative partner to the U.S. or China.

Dating back to its first ties with Mexico in 1613 and reinforced by a 3.1 million-strong Nikkei community, Japan holds the longest-standing diplomatic relationship with Latin America among Asian nations. In August 2014, late Prime Minister Abe announced the “Juntos” principles—three pillars guiding Japan’s diplomatic engagement with Latin American countries, namely: (a) Progress together; (b) Lead together; and (c) Inspire together. Robust investment policies have since enabled Japan to establish a strong foothold in Latin America, with close to 3,000 companies present by 2023—including major Japanese trading houses (sōgō shōsha). And this trend continues to gain momentum.

However, navigating Latin America’s complex landscape—which, despite a steady 2.5-percent annual economic growth, remains shaped by political and economic volatility, and geopolitical frictions—requires that Japanese investors carefully design their investment strategies and proactively manage associated risks.

1. Japan’s growing footprint in Latin American markets

For Japanese investors, it is no secret that Latin America’s rich resource base—spanning critical minerals for the energy transition, energy, and agriculture—makes it a region of significant strategic importance. Japan’s recent actions signal a deliberate and accelerated pivot to secure these resources and solidify its economic presence.

This renewed focus is underscored by significant financial and political commitment. In 2024, Japan’s foreign direct investment (FDI) into Latin America was double that from Africa and the Middle East combined. This push was reinforced by then Prime Minister Kishida’s high-level visit to Brazil and Paraguay in May 2024, and the establishment by Japan’s International Cooperation Agency of a US$1 billion fund in early 2025 to energize private-sector development.

These moves are strategically aligned with Japan’s 2022 Economic Security Protection Act, which aims to guarantee a stable supply of critical materials. Beyond investing in mining projects concerning critical minerals in Peru, Chile, and Brazil, Japanese companies have also ramped up their investment in renewable projects across countries like Brazil, Chile, and Mexico.

This strategic alignment of government policy and private-sector investment creates a compelling environment for new ventures and partnerships, as many opportunities remain untapped. However, with increased investments come increased risks associated with the legal and political idiosyncrasies of Latin America.

2. Investment treaty protections for Japanese investors in Latin America

Japan has entered into a robust network of investment treaties with Latin American states, offering Japanese investors significant legal protections and direct access to international dispute resolution mechanisms with host States. These agreements include both bilateral investment treaties (BITs) and multilateral frameworks. Indeed, Japan has signed BITs or Economic Partnership Agreements (EPAs) with six Latin American jurisdictions: Mexico (in force since 2004); Chile (2007); Colombia (2009); Peru (EPA in force since 2012, incorporating a 2009 BIT); Uruguay (2017); and Argentina (signed in 2018, pending entry into force). 

Among multilateral agreements, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which has been in force since 2018, is noteworthy for creating a major free-trade bloc that includes jurisdictions that traditionally have been attractive for Japanese investors, such as Chile, Mexico, and Peru.

These treaties generally protect a wide range of assets—such as shares, enterprises, rights under contracts, concessions, licenses, and other tangible and intangible property—owned or controlled directly or indirectly by Japanese investors. Protected investors include natural persons and legal entities, provided they meet the applicable incorporation or organizational requirements. 

The treaties contain key substantive protections for Japanese investors, including:

• protection against unfair and inequitable treatment (i.e., state measures that are arbitrary, discriminatory, disproportionate, inconsistent, unreasonable or that frustrate investor expectations, among others);
• protection against expropriation, including indirect expropriation;
• the guarantee of “full protection and security”;
• guarantees of non-discrimination vis-à-vis domestic and other foreign investors; and
• the so-called “umbrella clause” (included in some of the treaties), which can elevate state commitments in contracts and other instruments to treaty obligations.

Importantly, under these treaties, Japanese investors typically have access to international arbitration to directly resolve disputes with host States without requiring the intervention of their home State. The available fora vary in the different treaties but often include the World Bank’s International Centre for Settlement of Investment Disputes.

Access to international arbitration is a key advantage for investors seeking to mitigate political and regulatory risks in long-term projects involving substantial capital investment. It offers an alternative to litigation in the domestic courts of the host State, with specialized arbitrators rendering final and binding awards subject to very limited review. In sum, for Japanese companies investing in Latin America’s energy transition projects, natural resource industries, or transportation, these protections help mitigate risks associated with sudden policy changes, unfair treatment, and expropriation, among other adverse measures. They also ensure that, if disputes arise, investors can rely on international arbitration rather than local courts.

3. Disputes trends in Latin America and why expertise matters

Historically, political and regulatory volatility in Latin America has led to investment disputes. Understanding these risks—and planning for them—is therefore essential for Japanese investors considering long-term projects.

Several recurring factors have driven investment disputes in the region, including:

• Political transitions: A change from an investment-friendly administration to a more protectionist or interventionist government often results in policy reversals. Political changes of this nature have historically led to a rise in investment treaty claims in Latin America. For example, Hugo Chávez’s rise to power in Venezuela led to a wave of investment arbitration cases since the mid-2000s, most of which were resolved in the investors’ favor (with investors as diverse as ConocoPhillips, the Agroinsumos Iberoamericanos Group, and Smurfit Westrock securing awards of more than US$18 billion in aggregate). A similar pattern occurred in Bolivia when Evo Morales’s government nationalized energy and mining assets in the late 2000s (with investors such as Glencore and Rurelec successfully pursuing arbitration claims, while other extractive companies negotiated favorable settlements). In Argentina, new administrations have reviewed and annulled agreements concluded by prior administrations to settle international disputes, leading to new investor-State claims in relation to the same underlying disputes.

  The risk of adverse measures following a change in government is particularly relevant given the intense political cycle currently taking place—between late 2025 and October 2026, elections have taken place, or will take place, in Bolivia, Chile, Honduras, Costa Rica, Peru, Colombia, and Brazil. In addition, the political landscape in Venezuela is rapidly evolving, adding uncertainty to the political and investment landscape in the region. 

• Environmental licensing and social issues: Projects in sectors such as mining, energy, and infrastructure can face challenges during or after environmental impact assessment processes, which can lead to the revocation of otherwise valid permits or denial of approvals. For instance, Freshfields secured a US$1.4 billion award for Crystallex against Venezuela after the State refused to grant a permit for the operation of a major gold mine. Disputes relating to social issues in mining operations have also become common, with numerous such cases arising in Colombia, Ecuador, and Peru.
   
• Regulatory changes, including populist policies and changes relating to natural resources nationalism: These changes may affect the very basis under which a project was planned. Investors have been successful when the changes were arbitrary, unfair, and/or frustrated expectations that they legitimately had about the stability of the regulatory regime at the time they invested—for example, several won claims against Argentina for regulatory measures it enacted following the 2001 financial crisis that effectively de-dollarized and pesified tariffs in utilities contracts and other concessions.
   
• Judicial decisions: National courts have increasingly played a role in halting projects or imposing significant liabilities, adding another layer of unpredictability for investors, particularly in Colombia. The recent overhaul of Mexico’s judiciary also creates uncertainty to investors operating, or seeking to operate, there. 

Managing these risks starts before the investment is made. Early legal advice can ensure that investors structure their projects to benefit from the strongest treaty protections available, or to secure protections through investment contracts.

Pre-dispute planning is equally critical. Anticipating regulatory changes or adverse measures allows companies to position themselves for negotiation and to put in place strategies to avoid inadvertent waivers of rights, or to be prepared if the measure is enacted. 

Finally, if a dispute does arise, expert guidance is essential to designing a successful strategy—whether to negotiate a settlement or proceed with arbitration when no agreement is possible. The right approach, and expertise, can save time, costs, and preserve long-term business relationships.

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Freshfields stands as the undisputed leader in investment arbitration across Latin America, with an unparalleled track record of success. Our team has advised and represented clients—including Japanese investors, and several of the successful claimants named above—in high-stakes investment disputes in nearly every Latin American jurisdiction, spanning industries such as mining, oil & gas, energy, pensions, and infrastructure, among others. In the last three years alone, we have either won or successfully settled around 90% of the disputes in which we have been involved. We guide foreign investors through the region’s opportunities and challenges—from structuring investments to achieving favorable outcomes in complex disputes.