Global investors are piling into Latin American stocks at the fastest pace in a decade, driving markets across the region to multi-year highs.
The stock markets of Brazil, Colombia and Mexico have seen an increase in foreign buying, helping to push the MSCI EM Latin America Index to an eleven-year high and up more than 20% in 2026. This marks the strongest start to the year since 1991.
This renewed appetite underscores how investors are recalibrating their bets on the long-overlooked region ahead of presidential elections in Brazil and Colombia, where traders see potential for local policy changes and lower interest rates. The rally gained new momentum on Friday after the US Supreme Court struck down President Trump’s sweeping global tariffs, which, according to investors, represents another boost for the recovery of equities in the region.
“Latin America is back on the map, and attention is focused on the region at a pace not seen in 10 or 15 years,” said Alejo Czerwonko, investment director for EM Americas at UBS Global Wealth Management. “Emerging markets have been undervalued for a long period of time, and that conclusion more than applies to Latin America.”
While emerging markets are generally gaining ground thanks to investor diversification away from US assets, flows to Latin America stand out. This rotation is likely to see a near-term boost as the removal of Trump’s tariffs increases pressure on deficit risks and political uncertainty, further pressuring the dollar and boosting Latin American assets, according to Malcolm Dorson, senior portfolio manager at Global X Management Co.
The wave of buying is being felt in US-listed exchange-traded funds (ETFs), which investors use to quickly build exposure to foreign markets. Assets in BlackRock’s iShares Latin America 40 ETF, known by its ticker ILF, reached a record high of more than $1 billion in January alone, helping to boost its total assets, which are now around $4.3 billion.
The iShares MSCI Brazil ETF, or EWZ, the largest US-listed fund tracking Brazilian equities, recorded its largest monthly inflows in more than a decade in January, becoming the preferred tool for gaining exposure to Latin America’s largest market. Even billionaire Stanley Druckenmiller’s Duquesne Family Office was among those who got on board, adding EWZ shares just before the ETF’s 17% rise in January.
Part of that bet on Brazil is based on the possibility that the October elections will result in a political change that would see the defeat of President Luiz Inácio Lula da Silva.
“We don’t know who is going to win, but if the opposition wins there is more to gain than to lose if Lula stays,” said Thierry Larose, portfolio manager at Vontobel.
Still, it’s not an easy bet. The appearance of the son of former president Jair Bolsonaro, Flavio Bolsonaro, as a candidate late last year sparked a sell-off as his candidacy undermined hopes that the market-favored governor of São Paulo, Tarcisio de Freitas, would run.
Other investors are waiting for April, when officials must resign from their current positions to run for president, before making big bets on the next election.
In Colombia, divisions between center and right candidates are clouding expectations ahead of the presidential elections in May, while the main leftist contender leads the polls.
“It will be a relief if the right wins, but if the left wins, I wouldn’t rule out a sharp deterioration in asset prices,” Larose said.
Although Mexico does not face presidential elections this year, The country must still face uncertainty as it grapples with the review of a trade pact with the United States and Canada.
Cautious locals
Foreigners are increasingly avoiding ETFs and buying directly from local markets. In January, foreign purchases reached their highest level in at least four years in the Brazilian, Mexican and Colombian markets, according to data from regulators and analysts.
However, this binge contrasts directly with the signal from local investors, who are cautious in the face of political uncertainty.
“Generally, local investors care more about politics than foreign investors,” said Benjamin Souza, BlackRock’s director of strategy for Latin America. This does not mean that foreign investors will never be scared by political uncertainty, but rather that “in the end, the market will make the rational decision about where the possible returns are.”
However, beyond politics, Investors see an opportunity 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 cut the benchmark Selic interest rate from the current 15% — its highest level in nearly two decades — starting in March. In Mexico, Banxico, as the central bank is known, kept its reference interest rate unchanged at 7% by unanimous decision on February 5, ending a cycle of monetary easing that began almost two years ago.
“Whether due to rate cuts in some countries, a favorable political change or commodity tailwinds, we continue to have a positive stance on the region,” said Ola El-Shawarby, portfolio manager at VanEck, which has an overweight position in the region.
