Latin America bulls undeterred by Trump’s policy
U.S. stocks underperformed global peers last year as President Donald Trump’s trade policies and apparent threats to Federal Reserve independence contributed to periodic bouts of investors opting to “sell America”. Latin American markets were a major beneficiary. Trump’s approach to the region so far in 2026 has included an operation to seize and extract Venezuela’s president, an oil blockade on Cuba, and threats of military action in Colombia and Mexico. But investors in the region appear unfazed, with the region’s equity indices continuing to outperform as the U.S.-Iran war has sent a fresh wave of volatility through international markets. Brazil’s benchmark BVSP index has gained 21.7% since the start of the year. Chile’s S & P IPSA is up 8.2%, while Colombia, Peru and Mexico’s benchmark indexes have posted year-to-date jumps of 10.6%, 18.8% and 9%, respectively. The S & P 500 has gained 3.9% so far this year. This follows a remarkable 2025, when Chile’s benchmark S & P IPSA index surged 56.2%, far outstripping the S & P 500′ s 16.4% annual gain. Equities listed in Brazil, Mexico, and Colombia were also among the strongest performers in emerging market portfolios. A survey of Latin American fund managers published by Bank of America last month showed positioning in the region was continuing to build. A separate note from BofA in January said that in the weeks following the U.S. military operation in Venezuela, Latin American local markets hit record highs. This, the bank said, was “supported by strong foreign flows” into emerging markets. The MSCI Emerging Markets Index, which surged 33.6% in 2025, has jumped 14% since the start of this year. Meanwhile, the MSCI Emerging Markets Latin America Index, which soared 54.8% last year, has already climbed 23% higher since 2026 began. The dramatic operation to seize Venezuelan president Nicolás Maduro on Jan. 3 galvanized investment rather than dented it. Stocks listed in the country surged to record highs on hopes that a new government and U.S. involvement could turn the economy around. Its benchmark Indice Bursatil de Capitalizacion , or IBC, is up nearly 216% year-to-date. Following Maduro’s capture, Trump hinted that a failure to crack down on alleged drug trafficking could also put Colombia and Mexico at risk of U.S. intervention, and went on to impose a de facto fuel blockade on Cuba. Romain Bordenave, emerging market debt and FX portfolio manager at Edmond de Rothschild Asset Management, told CNBC that Venezuela was a “highly isolated EM story” after “years of sanctions, default and economic collapse.” “As a result, even significant political developments tend to generate limited spillover. For EM investors, Venezuela is a niche, optionality-driven case rather than a systemic risk capable of destabilizing regional assets,” he said. Nicolas Jaquier, emerging market fixed income portfolio manager at Ninety One, said Latin America’s resilience to ongoing global geopolitical risks was due to its distance from and limited direct trade links to the Middle East, as well as the region’s commodities wealth. He told CNBC over email: “The risk of extended closure of the Strait of Hormuz also serves to emphasize again the importance of Latin America oil markets for the U.S. “From that perspective, established oil producers such as Brazil, Colombia, Mexico and Ecuador should benefit.” He added that Argentina’s oil and gas trade balance had turned positive, and there are strong prospects for continued output growth, meaning the country will benefit as a relatively new entrant to the energy export market. Since the U.S. and Israel launched strikes on Iran in late February, oil prices have surged, although looming peace talks have seen prices cool in recent days. “The importance of stability in Venezuela to the U.S. is also probably increased and the presidency of Delcy Rodriguez has been on track on delivering on key U.S. demands,” Jaquier added. “So far, they have moved faster than expected.” FX in focus Jaquier said the most significant markets in the region had seen a repricing of monetary policy expectations in local rate curves. “Markets that were pricing cuts (Brazil, Mexico, Chile) have repriced meaningfully with only Brazil still pricing some cuts, but much fewer,” he said. However, his team sees the 100 basis points of hikes markets are pricing in for Mexico as “overdone.” While some consensus positions in Brazil and Mexico had been significantly reduced, Jaquier told CNBC that the market shake-up had opened up new opportunities. “FX should remain relatively supported by external accounts and high real rates,” he said. Over the past three months, the Brazilian real has added more than 7% against the U.S. dollar, despite the greenback regaining some ground against most currencies in March as investors sought out safe-haven assets amid the Iran war. The Argentine peso gained 4%, while the Colombian peso rose by 2.5% versus the dollar. Chris Metcalfe, chief investment officer at IBOSS, told CNBC that the “case for diversification across both asset classes and currencies has rarely been stronger than it is today.” “In currency markets, given the severity of the situation in the Middle East, we would have expected a much stronger performance from the US dollar than has materialized,” he said. “This suggests that, once hostilities subside, unless they persist for several years, the dollar is likely to resume its weakening trend. More broadly, we do not view the current U.S. administration’s approach as supportive for US assets beyond the very short-term safe-haven trade.” Latin American markets were hit particularly hard by Trump’s country-specific tariffs. Brazil faced a 50% levy, which Trump partly attributed to the prosecution of his ally, former president Jair Bolsonaro. But after the Supreme Court struck those tariffs down in February, Trump imposed a blanket tariff of 10%, potentially rising soon to 15%, levelling the playing field between different regions and countries. Thomas Mucha, a geopolitical strategist at Wellington Management, said that the asset manager was seeing a growing interest among clients across emerging markets. “Investors, broadly speaking, are moving away from this idea of EMs as an asset class, and there’s a lot more focus on individual country performance,” he told reporters in London in March. “[Portfolios are becoming] more differentiated as part of broader diversification,” he said.
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