Why Latin American stocks are attractive right now
Low valuations and soaring commodity prices have boosted Latin American stocks this year. Alex Rankine looks at why the region is lucrative right now.

Latin America is proving “a darling destination for investors in 2022”, say Anisha Sircar and Rodrigo Campos for Reuters. Low valuations and soaring commodity prices have given the region’s stocks a boost. Currencies in Brazil, Colombia, Peru and Chile are the “four best-performing across emerging markets against the dollar” so far this year.
Stronger local currencies help flatter gains for foreign investors. The MSCI Emerging Markets Latin America (LatAm) index has gained 25% in dollar terms year-to-date, even as the broader MSCI Emerging Markets (EM) index has dropped 8%.
That spurt of outperformance is welcome after a long spell of disappointment. In the three years up to 14 March, the MSCI Latin America index fell 4.7%, compared with a 9.8% gain for the MSCI Emerging & Frontier Markets index, says Kathleen Gallagher for Investment Week.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Brazil, the region’s biggest economy, fell into a severe recession in the middle of the 2010s. It was barely recovering before Covid-19 struck.
Yet with commodity prices rising, prospects are now looking up. Data from the Institute of International Finance shows that “on average, 72% of total exports in the largest Latin American countries were linked to commodities last year”.
With Russian supplies disrupted, the world is especially desperate for Brazilian crops, Colombian oil and Chilean copper. The region’s markets are closely correlated with commodity price movements; the last big boom coincided with the great commodity supercycle of the early 2000s.
Brazil is back in fashion
Brazil plays an outsize role in the landscape, since its stocks account for 62% of the MSCI LatAm. The local Ibovespa index has gained 15% so far this year. “High yields” and “cheap stocks” are drawing in investors, says Vinicius Andrade on Bloomberg, with $14bn of net inflows by foreign investors since mid-December. “Even after the recent rebound, the Ibovespa is trading at
7.7 times forward earnings, below its ten-year average of 11.7 times.
Not everything is rosy, says The Economist. Generous pandemic fiscal help and the “worst drought in 90 years” have combined to drive Brazilian inflation up to 10.5%. Incumbent president Jair Bolsonaro is a “fiscal chameleon” and is splurging public money in a bid to boost his flagging support.
That plan isn’t working. Polls suggest that Bolsonaro is on course to lose to former president Luiz Inácio Lula da Silva in elections this autumn. Leftwing Lula’s victory in 2002 “spooked the markets, but he was reasonably responsible in his spending in his first term, at least”. The rally shows investors are confident that Lula will “govern moderately” should he triumph again.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Why now is the right time to invest in biotech
The biotech sector holds huge potential for investors, with strong growth and attractive valuations. Here's the best way to play it.
-
Zoopla: Busiest home buying May since 2021, but property asking prices slide
Buyers return to the market after the end of higher stamp duty thresholds and post-Easter lulls, but average sales are £16,000 below asking price
-
Investment opportunities in the world of Coca-Cola
There is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?
Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
A fund that looks past the short term in Asia
Growth should remain strong, but successful managers also need to focus on governance. Here's how to find active opportunities in Asian markets.
-
Greg Abel: Warren Buffett’s heir takes the throne
Greg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?
Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'
Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn