Global cash is fueling a historic start for Latin America stocks
(Bloomberg) — Global investors are piling into Latin American stocks at the fastest clip in a decade, sending markets across the region to multi-year highs.
Equity markets in Brazil, Colombia and Mexico have seen a surge in overseas buying, helping push the MSCI EM Latin America Index to an eleven-year high and jumping over 20% in 2026. That marks the strongest start to the year since 1991.
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This renewed appetite underscores how investors are recalibrating bets on the long-overlooked region ahead of presidential elections in Brazil and Colombia, where traders see potential for local policy shifts and lower interest rates. The rally gained fresh momentum on Friday after the US Supreme Court struck down President Trump’s sweeping global tariffs, which investors say is yet another tailwind for the region’s equity revival.
“Latin American is back on the map, and people are paying attention to the region at a rate not seen in 10-15 years,” said Alejo Czerwonko, chief investment officer for EM Americas at UBS Global Wealth Management. “Emerging markets have been under owned for a prolonged period of time, and that conclusion applies on steroids to Latin America.”
While emerging markets are gaining broadly amid investor diversification away from US assets, the flows into Latin America stand out. The rotation is likely to see a boost in the near-term as the strike-down of Trump’s tariffs puts more pressure on deficit risks and political uncertainty, further pressuring the dollar and propelling Latin American assets, said Malcolm Dorson, a senior portfolio manager at Global X Management Co.
The buying spree is showing up in US-listed exchange-traded funds, which investors use to quickly build exposure to foreign markets. Assets in BlackRock’s iShares Latin America 40 ETF, known by its ticker ILF, attracted a record of more than $1 billion in January alone, helping boost its total assets which now stands at around $4.3 billion.
The iShares MSCI Brazil ETF, or EWZ, the largest US-listed fund tracking Brazilian equities, posted its strongest monthly inflows in more than a decade in January, growing into the preferred tool to gain exposure to Latin America’s biggest market. Even Billionaire Stanley Druckenmiller’s Duquesne Family Office was among those jumping in, adding EWZ shares just before the ETF’s 17% jump in January.
Part of that wager on Brazil is predicated on the potential for the October election to result in a political shift that would see the defeat of President Luiz Inacio Lula da Silva.
“We don’t know who’s going to win, but if the opposition wins there is more to gain than to lose if Lula stays,” said Thierry Larose, a portfolio manager at Vontobel.
Still, it’s not a straightforward wager. The emergence of former president Jair Bolsonaro’s son, Flavio Bolsonaro, as a candidate at the end of last year sparked a selloff as his candidacy undermined hopes that market-favored Sao Paulo Governor Tarcisio de Freitas would run.
Other investors are waiting for April — when officeholders must resign from their current positions to run for president — before making big bets on the upcoming vote.
In Colombia, divisions among center and right-wing candidates are clouding expectations ahead of the presidential election in May, while the top leftist contender is leading in polls.
“It will be a relief if the right wins, but if the left wins, I would not rule out a sharp deterioration in asset prices,” Larose said.
Though Mexico isn’t facing presidential elections this year, the nation still must confront uncertainty as it contends with a review of a trade pact with the United States and Canada.
Foreigners are increasingly skirting ETFs and buying directly in local markets, as well. In January, foreign buying was the highest in at least four years in Brazilian, Mexican and Colombian markets, according to data from regulators and analysts.
That binge, however, is in direct contrast to the signal from local investors, who are wary of political uncertainty.
“Generally, local investors worry more about politics than foreign investors,” said BlackRock’s head of strategy for Latin America Benjamin Souza. That doesn’t mean foreign investors are never spooked by political uncertainty, but “at the end of the day, the market will make the rational decision about where the potential returns are.”
Beyond politics, however, investors see an opening for central banks in some countries to start reducing borrowing costs, which would further support the rally.
Traders also expect Brazil’s central bank to lower the benchmark Selic rate from the current 15% — its highest in nearly two decades — starting in March. In Mexico, Banxico, as the central bank is known, left its benchmark interest rate unchanged at 7% in a unanimous decision on Feb. 5, pausing an easing cycle that started nearly two years ago.
“Whether it’s rate cuts in some countries, or favorable political change or commodity tailwinds, we continue to have a positive stance on the region,” said Ola El-Shawarby, a portfolio manager at VanEck, which is overweight in the region.
Mexico and India publish gross domestic product data, while Argentina releases its economic activity index
Brazil’s mid-February inflation data could bolster the case for a half-point interest-rate cut in March
Central banks in Nigeria, South Korea and Thailand will announce rate decisions, while Colombia’s central bank board holds a meeting to assess economic information ahead of their policy meeting in March
South Africa Finance Minister Enoch Godongwana will present the new fiscal year budget
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