Chile

Latin American financial assets have emerged among the best-performing markets worldwide at the start of 2026, driven by an unusual alignment of positive political catalysts, strong commodity prices, and renewed global appetite for emerging markets.

Equities and currencies across the region have sharply outpaced developed markets, reversing several years of relative underperformance.

The shift in sentiment has been triggered by a sequence of closely timed developments.

A sustained upswing in commodity prices — particularly industrial and precious metals — has strengthened the outlook for South America’s export-driven economies.

And while the full consequences of the recent US seizure of Venezuela’s Nicolás Maduro have yet to play out, some investors view the ousting as positive. A number hope the move will reduce geopolitical tail risks long associated with the region.

Adding to the momentum, the announcement of the EU–Mercosur trade agreement revived expectations of deeper trade integration between Europe and Latin America, even as doubts remain over its full implementation.

Global macro conditions have also played a decisive role. Major investment banks, including Bank of America and AllianceBernstein, indicate that a weaker US dollar in 2026 is boosting the appeal of emerging market assets.

Historically, periods of dollar weakness have coincided with strong emerging market performance, as capital shifts toward countries where returns are higher.

Countries most exposed to metals markets have been the primary beneficiaries. Chile and Peru — key producers of copper, silver and gold — have enjoyed substantial windfall gains from the metals rally.

Chile, the world’s largest copper exporter, shipped 14.9 million tonnes of the metal in 2024, according to ITC Trade Map data.

Latin America shines among top-performing global markets

Performance data compiled by CountryETFTracker show that five Latin American countries now rank among the world’s ten best-performing equity markets over the past three months.

Chilean stocks are up 36.6% since mid-October, making them the best-performing investable equity market globally via exchange-traded funds. Simultaneously, the Chilean peso has appreciated more than 8% over the past two months, reflecting improved terms of trade and renewed portfolio inflows.

Argentina has been another standout, with a 27.45% rally in equity markets since October. Investors have responded positively to the liberalisation reforms introduced by President Javier Milei, who took office in December 2023.

The International Monetary Fund, in its latest Regional Economic Outlook, credited the Milei administration with enacting “an ambitious package of market-oriented reforms” targeting productivity, regulatory simplification, and fiscal sustainability.

The IMF noted that, if sustained, these reforms could yield substantial medium-term gains by opening Argentina’s economy and improving investor confidence. That’s despite the fact that such austerity forms were particularly unpopular with the general public when first announced, triggering protests in Argentina.

Beyond Chile and Argentina, Peru has posted equity gains of around 27%, with the Peruvian sol now trading at its strongest level relative to the dollar in over five years.

Elsewhere, equities in Colombia rose about 16%, and Brazil has rounded out the regional leaders with a 12.9% rally.

By contrast, the US S&P 500 has gained just 4.8% over the same period, while Germany’s DAX is up around 5%, underscoring Latin America’s marked relative outperformance.

EU–Mercosur agreement signals strategic shift for Latin America

The long-awaited EU–Mercosur trade agreement, more than two decades in the making, is set to be formally signed on 17 January in Paraguay, marking a turning point in relations between Europe and South America.

For the founding members of the Mercosur bloc — Argentina, Brazil, Paraguay and Uruguay — the accord represents their first major trade agreement with an external partner, opening preferential access to a market of nearly 450 million EU consumers.

“The approval of the EU–Mercosur trade agreement is a landmark moment, creating the largest free trade area in the world by population,” Ángel Talavera, head of European macro at Oxford Economics, said in a note.

Combined, the EU and Mercosur economies account for around a quarter of global GDP and roughly 780 million people.

For Latin American markets, experts say the significance goes beyond improved agricultural access to Europe. The agreement is expected to lower tariff and non-tariff barriers on industrial inputs, particularly benefitting manufacturing-heavy economies such as Brazil and Argentina by reducing costs, improving competitiveness and strengthening supply-chain integration.

According to a study by Banco Santander, the deal is poised to transform trade and investment flows across South America. The EU already accounts for close to €370bn in foreign direct investment into Mercosur and over €125bn in annual trade.

Brazil’s Institute for Applied Economic Research expects the deal could lift Brazil’s GDP by around 0.5 percentage points and raise investment by 1.5 percentage points annually, reflecting stronger export prospects and increased foreign direct investment.

Estimates from Real Instituto Elcano and the Bank of Spain suggest EU–Latin America trade could expand by up to 70% over time, while intra-regional trade within Latin America could rise by as much as 40%.

A turning point for Latin America?

Latin America’s recent strong performance in global financial markets seems to reflect more than just cyclical tailwinds.

Rising commodity prices, easing geopolitical risks, and a weaker US dollar have all helped draw global investors back to the region after years of underperformance.

At the same time, reform momentum in countries such as Argentina and renewed trade links with Europe have improved perceptions of policy stability and long-term growth potential.

While challenges remain and many of the economic benefits will take time to materialise, markets are increasingly viewing Latin America as a relative bright spot among emerging economies.

For now, the region’s combination of high returns, improving fundamentals, and strategic relevance in global trade is proving hard for investors to ignore.

Chile has joined South America’s shift to the right, electing Jose Antonio Kast, a hardline conservative, as president.

He tapped into voters’ fears about a rise in crime and migration, and an economic crisis.

His victory marks a significant shift since the end of military rule more than 30 years ago.

It also comes as other populist conservatives have taken office in the region.

From Bolivia to Argentina to El Salvador, the move to the right is being watched closely, particularly by the United States.

But what does it all mean for the political dynamics in South America?

Presenter: Dareen Abughaida

Guests:

Claudio Barrientos – Professor at the School of History at Diego Portales University

Jose Ragas – Historian and assistant professor at the Catholic University of Chile

Christopher Sabatini – Senior fellow for Latin America at Chatham House

Far-right candidate Jose Antonio Kast has won a run-off election to become Chile’s 38th president, ousting the centre-left government currently in power. Al Jazeera’s Lucia Newman has been with supporters celebrating in the capital Santiago.

Far-right candidate Jose Antonio Kast has won a run-off election to become Chile’s 38th president, ousting the centre-left government currently in power.

On Sunday, with nearly all the ballots counted, Kast prevailed with nearly 58 percent of the vote, defeating former Labour Minister Jeannette Jara, a Communist Party politician who represented the governing centre-left coalition.

Jara and her coalition, Unity for Chile, conceded defeat shortly after the polls closed in the South American country.

“Democracy has spoken loud and clear. I have just spoken with President-elect [Kast] to wish him success for the good of Chile,” Jara wrote on social media.

“To those who supported us and were inspired by our candidacy, rest assured that we will continue working to build a better life in our country. Together and standing strong, as we always have.”

The result marks the latest victory for the far right in Latin America, which has seen a streak of right-wing leaders once considered political outsiders rise to power in countries like Argentina and Ecuador.

The tally also marks a significant comeback for Kast himself, the 59-year-old leader of the Republican Party. The 2025 election marks his third attempt to win the presidency — and his first successful bid.

During the last election, in 2021, he was trounced by outgoing President Gabriel Boric, who won by nearly a 10-point margin.

But Boric, a former student leader who became Chile’s youngest president, had seen his popularity slump to about 30 percent by the end of his four-year term. He was also ineligible to run for a second term under Chilean law.

In public opinion polls, voters also expressed frustration with recent spikes in crime and immigration, as well as a softening of Chile’s economy.

Kast, meanwhile, campaigned on the promise of change. He said he would address voter concerns by carrying out crackdowns on crime and immigration, including through a campaign of mass deportation, similar to what United States President Donald Trump has done in North America.

His security platform — dubbed the “Implacable Plan” — also proposes stiffer mandatory minimum sentencing, incarcerating more criminals in maximum security facilities, and putting cartel leaders in “total isolation” to cut them off from any communication with the outside world.

“Today, while criminals and drug traffickers walk freely through the streets, committing crimes and intimidating people, honest Chileans are locked in their homes, paralyzed by fear,” Kast writes in his security plan.

Kast has also taken a hard right stance towards social and health issues, including abortion, which he opposes even in cases of rape.

But those hardline policies earned Kast criticism on the campaign trail. Critics have also seized upon his own sympathetic comments about Chile’s former dictator, military leader Augusto Pinochet.

In 1973, Pinochet oversaw a right-wing military coup that ousted the democratically elected leader, Salvador Allende. He proceeded to rule the country until 1990. His government became known for its widespread human rights abuses and brutal oppression of political dissent, with thousands executed and tens of thousands tortured.

While Kast has rejected the label “far right”, he has repeatedly defended Pinochet’s government. Of Pinochet, Kast famously quipped, “If he were alive, he would vote for me.”

Opponents also sought to draw attention to Kast’s family ties: His father, Michael Martin Kast, was born in Germany and had been a member of the Nazi Party. The elder Kast immigrated to Chile in 1950.

Reporting from a polling site in the capital of Santiago, Al Jazeera correspondent Lucia Newman noted that Sunday’s victory was a historic one for Chile’s far right. But, she noted, Kast has sought to moderate his platform to better appeal to voters in the current election cycle.

“This is the first time since 1990 — since the military dictatorship before 1990, when Chile returned to democracy — that such a conservative government will be in power,” Newman explained.

“It’s really not certain just how conservative it will be. Jose Antonio Kast was a supporter of former dictator General Augusto Pinochet. He has shirked away from that in recent years, and certainly in this campaign.”

In the wake of Kast’s election victory, right-wing leaders from across the Americas offered their congratulations in statements on social media.

“Congratulations to Chilean President-Elect [Jose Antonio Kast] on his victory,” Trump’s Secretary of State Marco Rubio wrote. “The United States looks forward to partnering with his administration to strengthen regional security and revitalize our trade relationship.”

Argentina’s libertarian leader Javier Milei likewise chimed in, hailing it as a major win for his conservative political movement.

“FREEDOM IS ADVANCING,” Milei wrote, echoing his own campaign rallying cry.

“Enormous joy at the overwhelming victory of my friend [Jose Antonio Kast] in the Chilean presidential elections! One more step for our region in defense of life, liberty, and private property. I am sure that we will work together so that America embraces the ideas of freedom and we can free ourselves from the oppressive yoke of 21st-century socialism…!!!”

Ecuador’s right-wing President Daniel Noboa, meanwhile, said that “a new era is beginning for Chile and for the region”.

This year’s presidential race was the first time since 2012 that voting had been compulsory in the country. There are approximately 15.7 million eligible voters in the South American country.

Kast originally came in second place during the first round of voting on November 16. He scored about 23.9 percent of the vote, compared with Jara’s 26.8 percent.

But polls had widely favoured him to win in the run-off. While Chile’s left wing held a primary in June and coalesced around its victor, Jara, right-wing parties did not hold a primary to choose a coalition nominee.

The result was a fractured right in the first round of voting. But in the final contest, Kast was able to sweep up votes that had previously gone to his right-leaning adversaries, earning him a comfortable win.

Still, Kast faces a divided National Congress, which is expected to blunt some of his more hardline proposals. Kast will be sworn in on March 11.