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As measured by the iShares Latin America 40 ETF (ILF), the region is handily beating the S&P 500 year to date, up 15% compared to the S&P's 11% move. It's up more than 70% since late 2024. Can it continue? In a new report from Citi, Chief Latin America Economist Ernesto Revilla answers with a qualified yes — only if the countries seize the moment. "Latin America is poised for take-off. Or to be more precise: the conditions for Latin America to achieve a higher rate of growth are the best they have been in decades, and it is time to capitalize on the opportunity," wrote Revilla. The tailwinds helping the region are the best in decades: a weak dollar, strong commodities, favorable geo-politics, and a wave of elections that have brought pro-business and pro-reform leaders to power. The most important factor in the region's success is the weaker dollar, said Revilla. Investors seek out "stronger currencies and returns, debt repayment is cheaper (because they borrow in dollars) and commodity prices move higher." Add modern and mature central banking which is far better at controlling inflation than in decades past. Real rates in Latin America are some of the highest in the world leading to carry levels as high as 10% in Brazil, the report highlights. That attracts fixed income and foreign exchange inflows. At the same time, it also leaves room for cuts, which in turn would help stocks. Best countries to capitalize Beyond the macroeconomic tailwinds, there are country-specific reasons to be optimistic according to the report, whether its Mexico benefitting from the AI boom through the export of CPUs assembled there, or Argentina undergoing the "most market friendly shift in a generation." Danny Osorio, CEO of Andean Capital Advisors, said private capital flows into Latin America "have been reenergized" as "the region is on more stable footing than it has been in a while." An advisor to asset managers, family offices, and sovereign wealth funds, Osorio said he is seeing repatriation of capital back to Colombia, Peru, Ecuador and Argentina. Also helping is the recent strengthening of ties between the U.S. and Latin America. This month, Secretary of State Marco Rubio visited Colombia, Ecuador and Peru, which are closely aligned with the current U.S. administration. His visit reflects the White House's focus on the Western Hemisphere as articulated in both the National Security Strategy and National Defense Strategy, which called for a renewal of the Monroe Doctrine — leading to the portmanteau of "Donroe Doctrine." This aligns with numerous elections leading to leaders who want stable currencies, increased trade, more open economies, and closer ties with the United States. The risks The region is not without risks and headwinds. The greatest potential threat — a continued rise in U.S. interest rates. "If the US sneezes interest rate wise, that's full-on pneumonia for Latin America," said Osorio. Both Revilla and Osorio also point to El Nino, which is leading to both droughts and flash floods, hurting the important agriculture sector in countries such as Colombia and Peru. Cit's Latin American equity analysts acknowledge the regions' markets have been on a strong run and "part of the opportunity has already been reflected in valuations." For it to continue, earnings will have to improve, which they believe could lead investors to increase their allocation to the region. "Even a modest reallocation of global capital toward the region could have a meaningful impact," wrote Andres Cardona, director, LatAm Equity Research for Citi. Investors in Europe have put more money into Latin America stocks already in 2026 than they have the last 16 years, according to The Financial Times, citing Morningstar figures. How to play it The most liquid play in Latin American equities is the iShares MSCI Brazil ETF (EWZ) with $8.6 billion assets under management and average daily volume of 23 million shares. The ETF is up 18% so far this year. The fund has heavy exposure to mining with Vale S.A., oil via Petroleo Brasileiro SA Petrobras, and financials through Itau Unibanco and Nu Holdings. The region is underbanked and Osorio says the expansion of financial services is a strong trend with lots of opportunity as mortgages and car loans are becoming more available than ever before. Nu, a digital bank started in Brazil that has since expanded to Colombia and Mexico, is rated an overweight by Morgan Stanley with a price target of $21, up from its current price just under $14. The company announced this month it will expand into the United States. Brazil also has a key near-term catalyst and/or risk. The country's presidential election is just weeks away. New polling shows Flavio Bolsonaro, the more business friendly candidate neck and neck with current President Lula da Silva. That poll, the first to show Bolsonaro within reach of becoming president, led to a sharp rally in the Bovespa. The first round will be October 4 with a runoff scheduled for October 25.
document fetched 2026-09-21 02:47 · canonical https://cnbc.com/2026/09/20/caruso-cabrera-the-investing-tailwinds-for-latin-america-are-the-best-in-decades.html