Latin America’s tech ecosystem is advancing at a rapid pace. Startups are targeting large markets, adapting quickly, and introducing new business models into everyday life. However, the main obstacle isn’t always product design or a lack of talent. In my work evaluating valuations, risks, and capital structures for startups and scale-ups in the region, I constantly encounter the same structural barrier: a high weighted average cost of capital (WACC).

Central American leaders constantly talk about integration: trade and customs reform, as well as logistics and infrastructure. But the region’s next concrete step forward could come from something more subtle: reducing the cost of capital by harmonizing the rules and procedures that determine the costs of public borrowing and the way markets assess regional risk.

While Western institutional investors and Chinese state-backed lenders compete for influence over Latin America’s energy infrastructure, one factor is quietly determining who will build the region’s clean energy future: the cost of capital.

In previous installments of this series, we examined how inflation acts as a hidden tax that makes money more expensive, and we broke down the components of equity, debt, and the weighted average cost of capital (WACC).

In previous installments of this series on financing international projects in Latin America, we examined how sovereign risk and exchange rate volatility influence the cost of capital for long-term investments. This article focuses on inflation, an equally critical factor that operates quietly but relentlessly.