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Latin American construction costs pick up against an uncertain political backdrop

A combination of trade tariffs and political uncertainty is causing some developers and investors to slow down decisions in Latin America. Yet overall demand remains solid, supported by the region’s lower construction costs and investment in fast-growth sectors.

With a run of national elections having drawn to a close, bringing a level of political certainty, the interest rates set by banks in the region have started to settle. This is helping to ease cost escalation in most markets, including in the historically volatile Buenos Aires, where the rate of construction cost inflation is forecast to drop from 30.0 percent in 2024 to 10.0, and then 5.0 percent in 2025 and 2026.

The region’s continued role in mining and natural resources supply chains globally has typically maintained demand despite febrile economic and political environments across the continent. This has been supported by Latin America’s low cost of construction, cheaper labour and proximity to the US. This is reflected in our international construction cost analysis: all markets in the region sit in the lower half of our ranking, with Bogota offering the lowest costs in Latin America at US$1,265 per m². With the buffer against economic shocks and political instability which mining demand provides, growing real estate opportunities are opening elsewhere, including in corporate occupier and transport.

However, across the region, upcoming presidential and mid-term elections and short government terms are shifting sentiment, exacerbated by a lack of clarity on US-imposed tariffs. Political and policy instability is still cited as the biggest challenge to regional construction in our survey. As the rate of cost inflation is forecast to rise in 2025 for most of the markets in the region, short-term political anxiety should not distract clients from investment in driving programmes forward.

Breakdown data

Data: Tendering conditions

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Data: Key challenges

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Data: Supply chain

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Data: Labour

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Data: Digital (BIM)

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Top 3 sectors

Transport and mobility (road, rail, airport and ports)

Residential and social housing

Oil and gas

Capitalising on growth in high-performing sectors

In the face of a challenging political landscape, there are a number of opportunities in the Latin American market. Mining continues to thrive in traditional markets like Chile and Argentina. The expansion of copper processing plants and the construction of new lithium plants, needed to support high-tech developments around the globe, are in turn driving particularly high demand for real estate in Santiago. This is bringing the average cost to build to US$1,899 per m² – which is set to edge up again by 4.0 percent in 2025.

The economic strength supported by mining is then encouraging investment in other areas, such as mixed-use developments, especially in sports. From the Estadio Nacional in Lima, Peru, to the Nemesio Camacho stadium in Bogota, major sports stadium renovations are helping to elevate the region’s position on the global stage.

To support these major projects that elevate the region’s international standing, investment is also flowing in to improving connectivity within and between cities. With Belém, Brazil, soon to host COP30, for example, there’s a greater drive to scale up transport in and around major hubs in Brazil, through programmes like the NOA Belém Airport District.

Overcoming resource challenges

Maximising these opportunities relies on overcoming a reported scarcity of locally made materials.

In Mexico, for example, growing demand in the corporate occupier market is being hampered by a shortage of local manufacturers for important finishing materials like carpets and fabrics. The resulting reliance on imports, often from the US, is putting occupier projects at risk of delays and cost hikes given the changing tariff announcements from the White House. In Monterrey, construction cost inflation is set to nudge up from a predicted 5.0 percent in 2025 to 7.0 percent in 2026 as a result of high competition for resources. Costs to build in the city currently sit at US$2,199 per m².

A pinch on supply chains across Latin America more widely is impacting lead times for key construction components and materials. Almost half of respondents in our survey within the region report up to 40-week lead-in times for generators.

While there’s a movement to build self-sufficiency through greater domestic manufacturing, stakeholders should be considering steps to help mitigate project delays and cost overruns in the near term, including revisiting their procurement and delivery models to reduce their reliance on a narrow pool of suppliers.

Pushing past inertia

Though uncertainty over global trade and upcoming elections is naturally allowing hesitancy to creep into investments, stakeholders in the region should avoid putting their own decisions on hold and continue to invest in improving the systems and infrastructure underpinning project delivery to avoid issues further down the line.

With the majority of markets in Latin America reporting skills shortages, in part due to a limited pool of top-tier contractors, greater investment in digital solutions across the region would help to plug the skills gap and inform decision-making against a fast-changing landscape. Businesses are starting to make the case for digital transformation in their projects, particularly those with global portfolios, but there’s room to accelerate the adoption of new technologies to boost efficiency and productivity.

Ultimately, in a region where costs can be volatile and politics unstable, setting the foundation for informed investments must begin at the outset of a project. Early-stage cost benchmarking can help build confidence in decision-making and keep projects on track.

Hesitancy now doesn’t just mean facing higher costs and supply chain bottlenecks in the long run – clients risk missing out on the many opportunities in the region. Bumps in the road are inevitable, but for those who can get a close handle on costs and regional capacity, there’s real potential for growth in Latin America.