The global economic anxiety triggered by US President Donald Trump’s trade war and ongoing geopolitical tensions in Asia, Eastern Europe and the Middle East is adding fresh shine to the investment appeal of Latin America – a fact which has already heralded a shift in global investment portfolio allocations, and which could, in turn, help expand access to capital while reducing borrowing costs across the region.
Investors are paying more attention to the likes of Brazil, Chile and Mexico, as well as Argentina, which is finally emerging from a six-year financial crisis. Brazil’s currency, for example, gained by 12.5% against the US dollar this year through June 17, while the Mexican peso appreciated by 10.3%, according to Xe Corp.
Latin American equities outperformed those in all other markets in the first five months of this year, surging 22.7% in dollar terms, according to MSCI’s indices. Europe trailed at 21.18%, while US stocks lagged in last at 1.13%, the indices show.
Leading the pack
Daniel Gewehr, head equity strategist for Latin America at Itaú BBA in São Paulo, says that investor focus on the region has broadened in recent months from emerging markets specialists to global strategy funds. In Brazil, foreign investment flows to the stock market reached 20.6 billion Brazilian reais ($3.75 billion) this year through mid-May, a huge turnaround from an outflow of $33.3 billion reais ($6.1 billion) in the same period of 2024, according to the bank.
On the fixed-income side, Latin American issuers have successfully tapped global bond markets at a healthy rate in recent months, led by Mexico’s $8.5 billion issuance – its largest ever – and, on the corporate side, a $2 billion deal by Colombian food producer Grupo Nutresa, with strong investor demand for the securities.
“Latin America has received a larger share of a smaller pie in recent months,” says Alejandro Guin-Po Bon, a senior economist at asset management firm LarrainVial in Santiago. “Most notably, the region has benefited as an emerging market.”
Some global investors are starting to consider the region as something of a safe haven, he adds. While that remains a bold contention, the fact that it’s being made at all is significant.
For Guin-Po, Latin America stands out from other emerging markets because it is suffering less than its peers in Asia from Trump’s April 2 announcement of his import tariffs on the world, which he dubbed America’s Liberation Day. Countries in the region have been mostly hit with the 10% baseline tariff defined by the US government, far less than the more than 25% on Asia.
Also, in contrast to other emerging economies, Latin America’s institutions have shown impressive resilience under pressure over the past few years.
Chile, for example, has rejected two proposals for constitutional reforms since 2022 that were feared by investors, who believed they would stymie investment and economic growth. Brazil avoided an alleged coup-d’état in 2022, and the politicians accused of conspiring against democracy are on trial. Argentina went through a peaceful, although polarizing, change in government and has been able to implement drastic policy reforms to balance the budget without going off the rails. Tricky political situations have been handled without major damage to the democracies of Ecuador and Peru, while central banks across the region have had the space to deploy unpopular but necessary measures to rein in monetary policy.
THE COST OF MONEY
Across Latin America, countries were quick to hike interest rates as inflationary pressures mounted in the wake of the COVID-19 pandemic, a fact that won plaudits from investors as central banks found themselves with ample room for maneuver — in contrast to Asia and Europe.
“[Latin America] still has some of the highest interest rates in the world, but a downward cycle has started or is about to start in the region’s economies,” Guin-Po says. “In a context where investors are looking for diversification, Latin America offers today some characteristics that can be seen as safe haven features.”
His argument, in a nutshell, is that Latin American policy-makers to a large extent had already done their homework before the global turmoil that has since roiled markets in 2025. Investors are also optimistic that forthcoming elections in the region will deliver market-friendly administrations in Brazil, Chile, Colombia and Peru, and that voters will give their thumbs-up in this October’s midterms to the economic reforms undertaken by Javier Milei in Argentina.
A FEW DOUBTS
Of course, things could always go wrong. In Brazil, investor concerns are swelling about a widening fiscal deficit. Political violence has erupted in Colombia, and a controversial judicial reform has sparked worries in Mexico.
Nur Cristiani, head of Latin American investment strategy at J.P. Morgan Private Bank in New York, says that while calling the region a new safe haven for global capital may be a step too far, the region is in a much better shape than many had expected.
“It is not that Latin America will take that space as a safe haven, not even within the emerging market universe,” she says. “It will still be perceived as part of that emerging market cohort for which you need to have a greater risk tolerance.”
Even so, she says there is an opportunity for the issuers across the region to attract more investors to their bonds.
“There is an openness from investors to once again start looking at the stories and maybe not necessarily shut out emerging markets altogether just because they are riskier markets,” Cristiani says. “Investors will pay more attention to detail, and that could open room for Latin America to take out greater share of global portfolios.”
Trump’s trade war has weakened the dollar and spooked investors. His signature piece of legislation, the One Big, Beautiful Bill Act, which calls for cutting taxes and raising spending, has made many observes more suspicious of the sustainability of the government’s fiscal deficit — and less eager to invest in US assets as a result.
A so-called Anywhere But USA, or ABUSA, trade – an acronym that translates in Spanish to “abuse” or “bully” – has gathered pace among investors. Ashmore, a London-based fund management firm, argues that US exceptionalism in terms of its enduring investment appeal no matter the underlying debt dynamics was unsustainable; the firm forecasts a “multi-year diversification trend away from US assets.”
Stéphane Publie, head of coverage and investment banking at Crédit Agricole CIB Americas, says this uncertainty about the future of the US deficit is driving investors to look for more attractive assets, including in Latin America.
“Many now view the risks in several Latin American countries as manageable, which is driving investment in the region,” he says. “While it has not reached the billions, there has been a notable influx of capital.”
Many now view the risks in several Latin American countries as manageable, which is driving investment in the region
Stéphane Publie
ROOM TO GROW
Latin American equity markets, meanwhile, are well-positioned for an influx of capital, says Itaú BBA’s Gewehr. Valuations in the region are well below other vaunted emerging markets like India, he points out. In Brazil, stocks are trading at eight times the price-to-earnings ratio, compared with an average of 11 times over the previous 15 years. Another sign that the market is geared for more activity is that there are more than 130 stock buyback programs under way in Brazil, the highest number ever recorded in the country. Buyback programs, Gewehr says, are a strong indication that stocks are undervalued.
“Stock markets have gone up everywhere, but valuations remain attractive in Latin America,” he says.
There are even some stocks in the region that could be seen as defensive plays by some investors. Compiling statistics from B3, the São Paulo stock exchange, Itaú BBA has spotted an increase of exposure from foreign accounts to Brazilian utilities. Regionally, the financial sector is robust, Gewehr says, and plays in areas such as water and sanitation are also drawing interest for their long-term potential for delivering steady dividends. Argentina-based e-retailer Mercado Libre is also popular with international funds, he adds.
Adding to the momentum, returns from the region’s stock exchanges have improved thanks to the strength that local currencies have shown against the dollar. In the year to mid-June, the dollar had dropped more than 11% against the Brazilian real, 9.3% against the Mexican peso and almost 6% against the Chilean peso. If the appreciation of local currencies is added to the performance of local stock markets in the same period (15.8% in Brazil, 15.2% in Mexico and 17.9% in Chile), the region’s investment appeal is clear.
SEEKING ALPHA
Betting on currencies against the dollar is not without its risks and many investors have been burned historically via increased exposure to Latin American currencies via equities or bonds. But these are unusual times that may require an adjustment of expectations.
“The outlook for currencies demands caution,” J.P. Morgan’s Cristiani points out. But structurally, “they might be stronger than what we have seen in the past,” she adds.
Joe Delvaux, a London-based senior portfolio manager for emerging markets fixed income at Amundi, says that issuers can take advantage of the current environment, especially in segments like bonds with ESG features, demand for which remains strong in the region.
But he believes it is still way too soon for investors to see Latin America as a haven against global market volatility.
“While there are numerous very positive stories that are playing out, Latin American markets lack the depth, stability and credit rating quality to be considered as a ‘safe haven,’” he says. “That is not to say that these are not alpha-generating opportunities that present themselves, but it comes down to putting in the detail and analysis while focusing upon generating the right risk-adjusted returns.” LF