Latin American financial assets have emerged among the best-performing markets worldwide at the start of 2026, driven by an unusual alignment of positive political catalysts, strong commodity prices, and renewed global appetite for emerging markets.
Equities and currencies across the region have sharply outpaced developed markets, reversing several years of relative underperformance.
The shift in sentiment has been triggered by a sequence of closely timed developments.
A sustained upswing in commodity prices — particularly industrial and precious metals — has strengthened the outlook for South America’s export-driven economies.
And while the full consequences of the recent US seizure of Venezuela’s Nicolás Maduro have yet to play out, some investors view the ousting as positive. A number hope the move will reduce geopolitical tail risks long associated with the region.
Adding to the momentum, the announcement of the EU–Mercosur trade agreement revived expectations of deeper trade integration between Europe and Latin America, even as doubts remain over its full implementation.
Global macro conditions have also played a decisive role. Major investment banks, including Bank of America and AllianceBernstein, indicate that a weaker US dollar in 2026 is boosting the appeal of emerging market assets.
Historically, periods of dollar weakness have coincided with strong emerging market performance, as capital shifts toward countries where returns are higher.
Countries most exposed to metals markets have been the primary beneficiaries. Chile and Peru — key producers of copper, silver and gold — have enjoyed substantial windfall gains from the metals rally.
Chile, the world’s largest copper exporter, shipped 14.9 million tonnes of the metal in 2024, according to ITC Trade Map data.
Performance data compiled by CountryETFTracker show that five Latin American countries now rank among the world’s ten best-performing equity markets over the past three months.
Chilean stocks are up 36.6% since mid-October, making them the best-performing investable equity market globally via exchange-traded funds. Simultaneously, the Chilean peso has appreciated more than 8% over the past two months, reflecting improved terms of trade and renewed portfolio inflows.
Argentina has been another standout, with a 27.45% rally in equity markets since October. Investors have responded positively to the liberalisation reforms introduced by President Javier Milei, who took office in December 2023.
The International Monetary Fund, in its latest Regional Economic Outlook, credited the Milei administration with enacting “an ambitious package of market-oriented reforms” targeting productivity, regulatory simplification, and fiscal sustainability.
Related
The IMF noted that, if sustained, these reforms could yield substantial medium-term gains by opening Argentina’s economy and improving investor confidence. That’s despite the fact that such austerity forms were particularly unpopular with the general public when first announced, triggering protests in Argentina.
Beyond Chile and Argentina, Peru has posted equity gains of around 27%, with the Peruvian sol now trading at its strongest level relative to the dollar in over five years.
Elsewhere, equities in Colombia rose about 16%, and Brazil has rounded out the regional leaders with a 12.9% rally.
By contrast, the US S&P 500 has gained just 4.8% over the same period, while Germany’s DAX is up around 5%, underscoring Latin America’s marked relative outperformance.
The long-awaited EU–Mercosur trade agreement, more than two decades in the making, is set to be formally signed on 17 January in Paraguay, marking a turning point in relations between Europe and South America.
For the founding members of the Mercosur bloc — Argentina, Brazil, Paraguay and Uruguay — the accord represents their first major trade agreement with an external partner, opening preferential access to a market of nearly 450 million EU consumers.
“The approval of the EU–Mercosur trade agreement is a landmark moment, creating the largest free trade area in the world by population,” Ángel Talavera, head of European macro at Oxford Economics, said in a note.
Combined, the EU and Mercosur economies account for around a quarter of global GDP and roughly 780 million people.
For Latin American markets, experts say the significance goes beyond improved agricultural access to Europe. The agreement is expected to lower tariff and non-tariff barriers on industrial inputs, particularly benefitting manufacturing-heavy economies such as Brazil and Argentina by reducing costs, improving competitiveness and strengthening supply-chain integration.
According to a study by Banco Santander, the deal is poised to transform trade and investment flows across South America. The EU already accounts for close to €370bn in foreign direct investment into Mercosur and over €125bn in annual trade.
Brazil’s Institute for Applied Economic Research expects the deal could lift Brazil’s GDP by around 0.5 percentage points and raise investment by 1.5 percentage points annually, reflecting stronger export prospects and increased foreign direct investment.
Estimates from Real Instituto Elcano and the Bank of Spain suggest EU–Latin America trade could expand by up to 70% over time, while intra-regional trade within Latin America could rise by as much as 40%.
Latin America’s recent strong performance in global financial markets seems to reflect more than just cyclical tailwinds.
Rising commodity prices, easing geopolitical risks, and a weaker US dollar have all helped draw global investors back to the region after years of underperformance.
At the same time, reform momentum in countries such as Argentina and renewed trade links with Europe have improved perceptions of policy stability and long-term growth potential.
While challenges remain and many of the economic benefits will take time to materialise, markets are increasingly viewing Latin America as a relative bright spot among emerging economies.
For now, the region’s combination of high returns, improving fundamentals, and strategic relevance in global trade is proving hard for investors to ignore.
Leave a Comment
Your email address will not be published. Required fields are marked *