The Investment Case for Latin America

IN THIS PUBLICATION:

• We make the case for why parts of Latin America are primed to outperform most of the rest of the world through the end of the decade.
• Latin America has a lot of commodities for which demand is increasing and, crucially, is located far away from the instability of Eurasia.
• If Latin America is ever to achieve its potential, it will happen now – the global geopolitical environment today is as favorable as it will ever get for this part of the world.

Introduction

“Latin America has specialized in losing ever since those remote times when Renaissance Europeans ventured across the ocean and buried their teeth in the throats of the Indian civilizations. Latin America is the region of open veins. Everything, from the discovery until our times, has always been transmuted into European – or later United States – capital, and as such has been accumulated in distant centers of power.” – Eduardo Galeano, Open Veins of Latin America

This piece is going to do something very dangerous. It is going to make a case that parts of Latin America are primed to outperform most of the rest of the world over the rest of this decade.

We are going to use the dreaded “p”-word – potential – a lot in this piece. There will be lots of “should’s” and “if’s” – Argentina should do this, if Peru can do that – because none of this is certain. Thinking about, let alone investing in, Latin America is not for the faint of heart. For centuries, the region has punched below its weight – content to boom and bust based on foreign demand for its resources rather than build the sorts of political institutions necessary for long-term success.

That Latin America is about to boom is relatively certain. As always seems to be the case, Latin America is rich with the resources the rest of the world needs. From a commodity perspective, that is a straightforward bet – and it is why Latin American equities have outperformed their peers over these past few topsy-turvy months. (Full disclosure: over at Cognitive Investments, where I serve as Director of Geopolitical Analysis, we are long Chilean and Brazilian equities.)

The question is whether Latin America can finally transcend the boom and become more than just an open vein for the rest of the world to plunder, and the reason this is a dangerous piece is that I am going to argue in the affirmative.

To be clear: nothing in the region’s recent history suggests it is ready to make such a pivot (Like Don Quixote, I may be tilting at windmills – which I guess would mean Diego and Tim are svelt-looking versions of Sancho. Joke’s on y’all!). But I’ve also read enough history to know that the period when the region came closest to achieving its potential was the last time the world looked this multipolar, and Eurasia looked this fracked up – the first decades of the 20^thcentury. If there was ever a time for Latin America to exert agency over its environment, it will be over the next 5-8 years, because the global macro environment will never be more favorable for the region than it is about to be.