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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is chair of Rockefeller International. His latest book is ‘What Went Wrong With Capitalism’
As the mania for “American exceptionalism” fades, Europe and even China have emerged as new destinations for capital. But the best-performing region in the world this year is Latin America, and it is missing from the global conversation. Its stocks are up 21 per cent in dollar terms, well ahead of Europe in second place and the average return of 6 per cent across emerging markets.
After fuelling the US market’s meteoric rise in recent years, global investors are looking to reallocate capital to beaten-down markets — including Latin America. Most of the region is low on President Donald Trump’s tariff target list, making it a haven from trade wars. But perhaps the least appreciated reason that its markets are doing well is the shifting politics.
Chile’s former president Sebastián Piñera once told me that Latin America turned “left in good times, right in bad times”. After the roaring 2000s, a “pink tide” brought to power many left-leaning populists, who have led the region backwards in the past decade. Productivity growth turned deeply negative — the worst of any region. On cue, the political tide is turning again.
Powerful leaders on the left are curbing their leftist instincts, under market pressure. Last year, Brazil’s Luiz Inácio Lula da Silva was promising a giveaway a day; now he’s showing some signs of fiscal discipline. Mexico’s progressive Claudia Sheinbaum is offering “republican austerity” along with a generally more pro-business posture than her predecessor, Andrés Manuel López Obrador.
Other nations are turning decisively to the traditional right of limited government and free-market reform. Though often cast as a Latin copy of Trump, Argentina’s Javier Milei is pushing trade deals not tariff increases, downsizing government consistently rather than erratically. The result: a dramatic turnaround in the country’s economy and financial markets.
The share of voters who say a “market economy” is the best path forward has risen to an unusual high — 66 per cent. This mood shift to the right comes at a critical moment. This year and next, an extremely busy election schedule is unfolding in Latin America, where nations representing 85 per cent of the region’s GDP are going to the polls.
Last month in Ecuador, the rightwing incumbent Daniel Noboa scored an unexpectedly big win, over an opponent who may have been tarnished by close ties to former president Rafael Correa, a progressive legend now living in exile after being convicted of corruption. Next up, Argentina, where expectations are high for Milei to lead his party to victory in October legislative elections.
Regionwide, social media is buzzing about the “Milei model”. In Chile, rightwing challengers dominate the pre-election polls. Frontrunner Evelyn Matthei is a fiscal conservative who eschews improvisation, and her closest rival, Johannes Kaiser, is even more hawkish: one of his advisers keeps a little statue of Milei wielding a chainsaw — a symbol of his deep spending cuts.
The front-runners for the elections are all on the right. Colombia has its first leftwing leader since independence in 1810, scandal-plagued Gustavo Petro, and his moves to increase state control over sectors from health to energy have blown out the fiscal deficit and helped turn the petro-rich nation into a gas importer. Petro’s chosen successor is polling behind two rightwing candidates, one a former Bogotá mayor widely praised for responsible public spending.
Peru is a similar scene: a deep field led by challengers on the right and the incumbent Dina Boluarte under even harsher attack. She is accused of corruption and indifference as many Peruvians struggle to buy food, with an approval rating at 3 per cent — possibly the world’s worst ever recorded. The top three contenders all are categorised as “centre right”.
In Brazil, Lula’s approval rating recently hit its all-time low. The economy is growing but voters are angry over rising prices and crime. In local elections last October, voters turned against the left, and more sharply to the moderate right than the far right. Lula, 79, has had health problems and seems likely to be replaced by a leader well to his right in next year’s ballot.
With the far right ascendant in much of the west, it is notable that Latin America is not turning the same way, to a Trumpian closed economy. It is favouring leaders with more traditional agendas, based on free markets and open economies. This increases the region’s chances of escaping its damaging growth slump and attracting capital in this post-American exceptionalism world.
