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LATAM: JP Morgan Notes Increasing Investor Interest In The Region

LATAM
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  • Following a series on investor meetings, JP Morgan notes that there seems to be increasing interest in the LatAm region, though investors look under-invested in local assets. Concerns about fiscal policy and the impact of potential Trump policies were part of almost every conversation. When comparing the state of markets within the region, many are wondering whether Brazil – the underperformer in 2024 – has seen the worst and whether the best for Argentina is behind us.
  • JPM says that views on Brazil were more dispersed than in other countries, with low conviction calls persisting. Brazil may benefit from a deepening of trade tensions between the US and China, as the latter sources more imports from Brazil, but the risk is of it being dragged into a broader trade war. On the fiscal, JPM does not see evidence of fiscal dominance at this point but notes concern about higher interest rate and deteriorating debt dynamics. The bi-monthly budget review in March and the preview of the 2026 budget in April are key dates to monitor.
  • In Mexico, while Banxico will have the space to cut by 50bp at some point, JPM still believes this could materialise in March at the earliest. On Argentina, meanwhile, optimism remains in place. JPM anticipates a new IMF programme to emerge in early Q2, with the exchange rate regime transitioning to a managed float. Regarding capital controls, a gradual removal is advisable, while on the political front, JPM expects Milei’s representation in Congress to rise in October, potentially paving the way for macroeconomic reforms to boost national saving.
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  • Following a series on investor meetings, JP Morgan notes that there seems to be increasing interest in the LatAm region, though investors look under-invested in local assets. Concerns about fiscal policy and the impact of potential Trump policies were part of almost every conversation. When comparing the state of markets within the region, many are wondering whether Brazil – the underperformer in 2024 – has seen the worst and whether the best for Argentina is behind us.
  • JPM says that views on Brazil were more dispersed than in other countries, with low conviction calls persisting. Brazil may benefit from a deepening of trade tensions between the US and China, as the latter sources more imports from Brazil, but the risk is of it being dragged into a broader trade war. On the fiscal, JPM does not see evidence of fiscal dominance at this point but notes concern about higher interest rate and deteriorating debt dynamics. The bi-monthly budget review in March and the preview of the 2026 budget in April are key dates to monitor.
  • In Mexico, while Banxico will have the space to cut by 50bp at some point, JPM still believes this could materialise in March at the earliest. On Argentina, meanwhile, optimism remains in place. JPM anticipates a new IMF programme to emerge in early Q2, with the exchange rate regime transitioning to a managed float. Regarding capital controls, a gradual removal is advisable, while on the political front, JPM expects Milei’s representation in Congress to rise in October, potentially paving the way for macroeconomic reforms to boost national saving.