Have you considered investing in Latin America?

International investors seem to be returning to Latin America, thanks to low valuations, opportunities for diversification and stabilising fundamentals. However, the region still remains an unconventional destination. What should you know before diving into this market?

Latin America is currently grappling with global trade tensions and its own – sometimes persistent – growth barriers. Recently, the IMF lowered its economic growth forecast for the entire region for this year from 2.5% GDP growth to 2%. Last year, the region grew by 2.4%.

The nervousness surrounding the United States' tariff policy – and its impact on jobs and consumption – is making itself felt, particularly in Mexico. But if you only look at the negatives in the short-term, you miss the bigger picture, because it is precisely in periods of uncertainty that new investment opportunities tend to arise.

1. Why focus on Latin America (now)?

Markets in Latin America (LatAm) are back in the spotlight right now. According to Reuters, many international investors even see the region as 'a top destination' now that they aim to diversify their portfolios away from Wall Street.

• Low valuations. Compared to many ‘developed‘ markets, Latin American equities are relatively low valued. According to Reuters, investors currently pay around $9 for each dollar in earnings from Latam companies on the MSCI indices compared to more than $19 for developed markets (situation as at July 2025). This suggests that on paper, LatAm equities still have a lot of catch-up potential. In addition, after steep declines in 2024, regional indices are already around 20% higher in dollar terms this year, which may mean the start of a rally (situation as at July 2025).
• Diversification. In a world marked by geopolitical tensions and trade disputes, Latin America could be a valuable addition to traditional portfolios that have concentrated primarily on US and European investments up to now. The region is rich in raw materials that are important for the energy transition, such as copper and lithium, and agricultural products that feed the world: coffee, cocoa, sugar cane, meat, tropical fruit, to name but a few. Brazil is one of the world’s largest producers of iron ore, soy, beef and ethanol. Chile dominates the copper market. Peru is a major player in gold and silver. Mexico is strong in manufacturing, oil and gas…
• Stabilising fundamentals. Several Latin American countries have drawn lessons from past crises and have strengthened their institutions. In recent years, the central banks there have in many cases taken rapid action against inflation, thereby gaining credibility among investors. In some countries, fiscal discipline also improved, although there are considerable differences from country to country.
• Consumers and services. A growing middle class wants smartphones, mortgages, insurance, healthcare and leisure products. Employment is increasing in several countries. Successful companies such as the Argentine online platform Mercado Libre and the Brazilian bank Nubank illustrate the potential of consumer and service sectors in the region. Startup capital in Latin America grew by 26% in 2024 compared to 2023, outperforming Europe (7% growth) and Southeast Asia (34% contraction).
• Open markets. Latin America continues to stand out because of its relatively open trade structures. Despite the increase in trade barriers worldwide, many Latin American economies have continued to open up their markets and have conclude trade agreements both within the region and with partners outside the continent.

2. What are the risks and how can they be managed?

Besides opportunities, Latin America also presents several challenges investors should always bear in mind:

• Political and policy risks. The political climate in many LatAm countries can be quite turbulent. Presidents can take radical measures (social programmes, nationalisations, capital controls) or change policy direction after elections. Spreading across different countries is therefore important.
• Trade conflicts and macro influence. Trade tariffs can affect export earnings. At the same time, fluctuating demand in the US and China can impact growth. It may therefore be useful to also consider companies and sectors that are less dependent on exports.
• Volatility (part 1). Latin American markets tend to show more pronounced ups and downs. In 2024, for example, the MSCI EM Latin America Index fell by 25% compared with 2023, even though the index for broader emerging markets rose. Regularly investing small amounts may therefore make more sense than investing everything at once.
• Volatility (part 2). Many South American currencies are sensitive to global trends. For instance, the Brazilian real and Mexican peso were among the worst-performing emerging market currencies in 2024. An abrupt appreciation of the dollar or rising foreign interest rates could send local currencies plummeting, which would then reduce the local equity value for foreign investors. This could be countered by opting to invest in currency-hedged products.
• Cyclical and commodity risks. As many LatAm economies rely heavily on commodities, large price fluctuations can have a significant impact on their economies. Therefore, it is advised to spread your investments across several sectors, for instance by combining commodity-related stocks with local consumer stocks or service providers.

3. How to invest in Latin America?

• Equity ETFs and funds. For many investors, this is the easiest route. Some funds and ETFs focus specifically on Latin America (for example on the MSCI EM Latin America Index or on a certain region such as Latin America excluding Brazil). More broadly composed emerging markets funds often also contain a (smaller) share of LatAm securities. This gives you diversification across multiple countries and sectors with just one transaction.
• Directly in individual shares. For those who want more control: many large Latin American companies are traded on the international market. Examples include Petrobras and Vale (Brazil, commodities), Sociedad Química y Minera de Chile (the world’s largest lithium producer), América Móvil and Cemex (Mexico, telecom and building materials), and Mercado Libre (Argentina, e-commerce). These shares are often available through ADRs. An ADR is a certificate that is issued by a US bank and that represents ownership of a share in a foreign company. They are traded on stock exchanges like ordinary shares, making it easier for European investors to include Latin American companies in their portfolios.
• Commodities and commodity funds. An indirect way to invest in LatAm is to invest in commodities that are common there. You can invest in commodity ETFs or in global players in the sector (such as mining companies with large LatAm assets). This is relevant if you mainly want to benefit from the commodities side of things.

In any case, make sure that Latin America is not your sole focus, but part of a diversified portfolio. Investors should always combine their LatAm exposure with other geographical regions. As a rule, the region appeals to investors with a long investment horizon, who want and are able to take a bit more risk and investors who seek some extra diversification.

Before investing, be sure to read up on the key characteristics and risks of financial instruments.

Investing in Latin America?

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