Executive Summary
We have written a number of pieces on the broad macroeconomic implications of the shift from a unipolar world, where the terms of trade, finance and politics are largely determined by the U.S., to a multipolar world, marked by rising U.S./China competition, resource nationalism, a restructuring of supply chains and manufacturing bases. These changes strengthen the hand of resource rich nations and are particularly favorable for Latin America.
The region holds large reserves of resources whose secure supply is increasingly viewed as a vital national-security interest as well as key to supporting the growth of electrification and the AI datacenter build-out. After a decade in which commodity dependence was a curse, this endowment is transmuting into bargaining power.
Markets are taking notice, MSCI Latin America Index returned +55.3% in 2025 and is up +14.6% YTD through 5/21/2026, outpacing global markets. Valuations remain attractive, likely reflecting political and fiscal risks, suggesting an early-stage recovery from the -26.2% drawdown in 2024, rather than a late-stage bull market rally.
While there are political, fiscal and economic risks and opportunities vary by region, overall, Latin America presents a potentially attractive asymmetry with valuations and structural tailwinds providing a margin of safety with upside from continuing demand for resources to support the AI buildout, nearshoring and the restructuring of supply chains and broadening financial architecture. We believe a measured overweight to Latin America within broader EM exposure is warranted to capture this view.
From Unipolar to Multipolar World
The structural shift from a unipolar world, with the terms of trade, finance and politics largely determined by the U.S., to a multipolar world is unusually favorable for Latin America. The region is resource rich, poised to benefit from increasing demand for critical natural resource as political tensions reconfigure supply chains and payment systems as well as demographics.
Resource Abundance
Critical minerals have become necessary requirements of national security, electrification (Middle East catalyzing EV industry growth) and the AI datacenter build out rather than just industrial commodities. Latin America is home to large reserves and production across a range of essential natural resources.
- Copper. Latin America estimated to have ~40% of global reserves, with Chile estimated to be the largest producer of copper, nearly double the next largest highest nation, at 5.5M tons. Chile possesses nearly 18% of the world’s copper reserves compared to 4.8% for the US.
- Lithium. The “lithium triangle” of Chile, Argentina and Bolivia holds ~55% of known reserves. Chile and Argentina are among the top three global producers, accounting for 31% of global lithium production, and Bolivia is reforming its regulatory framework to attract investment and technology partners.
- Iron Ore. Brazil accounted for 38% of iron ore production.
- Rare Earths. Latin America holds the 2nd largest reserve base. Brazil is emerging as a significant player in nickel and rare earths.
- Oil & Gas. Venezuela has an estimated 300B barrels of crude reserves.
- Agriculture. Latin America is the top exporter of soy, beef, sugar and coffee.
Restructuring Manufacturing and Supply Chains
The COVID-19 pandemic exposed the fragility of global supply chains and with rising geopolitical tensions have companies prioritizing resilience, security, proximity and ideological alignment over margin optimization. Central and parts of South America benefit from the restructuring of supply chains and focus on friendshoring to reduce reliance on Asian manufacturing and Russian commodities.
Notably, Mexico benefits from the USMCA framework, logistical infrastructure, skilled labor and proximity to the U.S. Shipments to the U.S. take 1-2 days by rail or truck compared to 20-40 days from China, an advantage that widens with higher tariffs and increasing fuel prices.
Demographic Edge
Latin America also has a demographic edge. The region’s median age is 31.3, compared to 39.6 in China and 42.5 in Europe, with an average birthrate of 13 per 1000 for the largest countries, compared to an average of 8 for top emerging market economies. This “demographic dividend” means a growing labor force and consumer base.
Younger populations generally are more willing and able to take risk with a greater appetite for innovation and disruption. Latin America has become one of the fastest-growing venture capital markets globally, with ~$4.1 B deployed in 2025, up from ~3.6B in 2024, alongside the rapid expansion of mobile banking, fintech and e-commerce. While the US continues to dominate venture spending, the growth in Latin America is notable, as India, South Korea and China have seen material declines in capital raised since 2023.
Equity Markets
Latin American equities have moved decisively higher over the past 18 months. The rally has been broad, with Brazil touching 11-year highs as Mexico, Chile and Argentina have participated, and accompanied by fund flows, with Latin America-focused ETFs seeing strong net inflows in 2025 and 2026 YTD, suggesting an early-stage recovery rather than a late-stage bull market rally.
Returns
After languishing following the recovery from the COVID-induced drawdown, Latin American equities fell ~-26% in 2024 as global markets trended higher. The +55% recovery in 2025 (comparted to +23% MSCI ACWI, +18% S&P 500, +34% MSCI EM), supported by rising commodity prices, currency appreciation, easing global financial conditions and renewed foreign flows, has continued in 2026,gaining ~+15% compared to +10% MSCI ACWI, +9% S&P 500 and +20% MSCI EM.
Valuations
Latin American equity valuations remain attractive cheap relatively to the MSCI EM index, with 5 of the 6 major countries in the region trading below the MSCI EM index on a trailing twelve-month basis.
Catalysts / Risks
- Political. 2026 may prove a pivotal year for Latin American politics. The region has experienced notable political swings and currently appears to be moving toward more centrist and pragmatic leadership. The expectation is that deregulation, opening trade, pulling back from currency manipulation, moving away from policies that resulted in rapid inflation, high unemployment, lower growth and a lack of investment and civil unrest will support economic growth. Argentina’s election of Javier Milei in 2023 marked a dramatic break from Peronist policies and captured headlines but was also preceded by Ecuador’s snap election of Daniel Noboa, a young center-right businessman, and followed by similar results in Bolivia and Chile.
- Fiscal Deficits. While government debt to GDP ratios in the region, with the exception of Argentina, are lower than broader EM, as well as the U.S. and China, fiscal deficits remain a structural concern. Brazil’s gross public debt is 80% of GDP with the World Bank projecting to reach 95% under current policies. Mexico was recently downgraded by Moody’s citing a weakening of public finances with the ongoing support of Pemex. Argentina, despite the rapid decline in CPI (from +200% in 2024 to +30% in 20205), and new IMF funding still faces $19B in 2026 maturities.
- Economic & Currency. Latin American central banks generally tightened policy early and have policy room to ease if inflation eased as expected, though fiscal concerns may result in more cautious policy, with lower rates supporting investments. The consensus expects regional GDP growth of 2.1% in 2026 with easing inflation pressures stabilizing at the upper bound of most central bank target ranges.
Conclusion
While there are political, fiscal and economic risks and opportunities vary by region, overall, Latin America presents a potentially attractive asymmetry with valuations and structural tailwinds providing a margin of safety with upside from continuing demand for resources to support the AI buildout, nearshoring and the restructuring of supply chains and broadening financial architecture.
We believe a measured overweight to Latin America within broader EM exposure is warranted. Potential investments include:
- A passive ETF providing liquid, low-cost exposure to the largest companies across the region.
- Active mutual funds with a fundamental, long-term, value-oriented approach.
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