Emerging Markets: Why Latin America’s political shift matters for investors

Improved political stability and growth-focused policies are strengthening Latin America’s investment outlook. Pendal’s Emerging Markets team explains why this matters now and what it means for portfolios.

Emerging markets – key insights:

• Market-friendly governments are lifting investor confidence
• Fiscal discipline could support growth and returns
• Learn more about Pendal Global Emerging Markets Opportunities Fund

What’s driving the shift in Latin American emerging markets?

THE political backdrop across the Andean region has improved materially over the past year, with direct implications for emerging markets.

Chile led the shift with the election of a conservative government in late 2025, marking a move towards greater emphasis on economic growth, investment and public security.

Peru’s June 2026 presidential election returned a more market-friendly administration following years of political instability and repeated changes of leadership, although the narrow result suggests governance challenges will remain.

Days later, Colombia’s June 2026 election brought a more conservative president who has already appointed a finance minister focused on restoring fiscal credibility after several years of expansionary fiscal policy.

While the pace of reform is likely to differ across countries, all three have moved towards governments placing greater emphasis on macroeconomic stability, private investment and investor confidence.

As top-down country-focused investors, we believe political turning points can precede changes in economic fundamentals and equity market performance.

The Macroeconomic outlook for emerging markets

For capital markets, what matters most is not ideology, but the investment environment it creates.

Long-duration mining, energy and infrastructure projects require confidence in regulation, taxation and licensing.

A more predictable policy framework should encourage capital investment, strengthen export capacity and, over time, support broader economic growth through stronger currencies and higher employment, incomes and domestic demand.

The macroeconomic backdrop should improve, albeit gradually.

Loose fiscal policy under previous administrations contributed to a relatively hawkish monetary stance across much of the region.

If governments can re-establish greater fiscal discipline, central banks should be able to ease monetary policy; together with stronger private investment, this should support domestic demand.

Risks: Why success isn’t guaranteed

Success is not guaranteed. Peru continues to face weak political institutions and deep polarisation.

Colombia’s fragmented Congress means coalition building will remain essential for meaningful reform.

Chile retains stronger institutional foundations than its peers but translating legislative reform into higher investment and faster growth will inevitably take time.

What it means for emerging markets investors

Overall, we believe the direction of travel has become more supportive for investors across the Andean region.

We currently have no exposure to Peru, Colombia or Chile, but we continue to monitor developments across the region for future opportunities as we believe these trends are supportive of the broader Latin American investment backdrop.

The outlook will ultimately hinge on the outcome of Brazil’s presidential election in October, the implications of which we will explore in a subsequent report.

Frequently asked questions

• Why are emerging markets in Latin America attractive in 2026?

Market-friendly governments in Chile, Peru and Colombia are prioritising fiscal discipline and private investment, improving the investment outlook for the region.

• Which Latin American countries elected market-friendly governments?

Chile elected a conservative government in late 2025 followed by Peru and Colombia in June 2026. Brazil’s presidential election is due October 2026.

• How can investors access emerging markets?

Investors can gain exposure through actively managed strategies such as the Pendal Global Emerging Markets Opportunities Fund, which invests across a broad range of global emerging market shares.

About Pendal Global Emerging Markets Opportunities Fund

James Syme, Paul Wimborne, Ada Chan and Roshni Bolton are co-managers of Pendal’s Global Emerging Markets Opportunities Fund.

The fund aims to add value through a combination of country allocation and individual stock selection.

The country allocation process is based on analysis of a country’s economic growth, monetary policy, market liquidity, currency, governance/politics and equity market valuation.

The stock selection process focuses on buying quality growth stocks at attractive valuations.

Find out more about Pendal Global Emerging Markets Opportunities Fund here
 
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.

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