Emerging-market money managers are zeroing in on Latin America for their next big trade as a wave of upcoming elections could redraw the region’s political map, potentially aligning several countries more closely with Donald Trump.
The renewed attention comes after Argentina’s massive rally following President Javier Milei’s win in midterm elections, backed by unprecedented US support. For many, it made the country a case study for how right-leaning political shifts – and especially those perceived as Trump-friendly – can unleash gains in developing-world assets.
“You are facing a potential shift at the pendulum toward the right in Latin America,” said Pramol Dhawan, head of emerging markets portfolio management at Pacific Investment Management Co. “If there is a swing to the right, these assets will rip – there’ll be nothing remotely close to giving the returns you’ll get in Brazilian or Colombian local markets.”
Chile, Colombia and Brazil, some of the region’s largest economies, hold presidential elections in the next 12 months, with investors hoping for a shift to a more market-friendly approach in all three.
At the centre of the trade along with Argentina are countries like El Salvador and Ecuador that investors see as more aligned with US interests. Dollar bonds of the three countries have delivered investors gains of at least 24 percent since Trump’s election last year, according to data compiled by Bloomberg. That compares with a 13 percent return for a benchmark index of developing-nation sovereign debt.
The surge highlights how some funds are chasing election-specific outcomes as a driver of market moves. Zaftra, a Brazilian hedge fund that specialises in election-driven bets, posted its best month on record in October, gaining 9.2 percent after fees as it profited from Milei’s midterm win.
The fund, launched in 2023, also built a bullish position in the Chilean peso ahead of the country’s first-round vote that saw another right-wing candidate gain prominence, according to Felipe Sze, a portfolio manager at billionaire Alberto Safra’s financial firm ASA, which manages the fund.
Changing dynamics
“The way Trump’s administration sees the Western hemisphere is as its backyard, with the US having not just a right, but an obligation to intervene – particularly when it comes to countering China’s influence in mining-heavy countries like Chile,” said Petar Atanasov, Gramercy Funds Management’s co-head of sovereign research.
The firm is constructive on Chile heading into the 2026 cycle, looking at both sovereign bonds and the peso. “We think Chile has some catching up to do in FX,” Atanasov said, adding that any improvement in relations with Trump would be a big positive.
The first round of elections in Chile last weekend saw arch-conservative José Antonio Kast emerge as the favourite for the December 14 run-off, sparking a rally in the peso before the mood with risk assets soured globally. Polls in Colombia and Brazil point to growing frustration with left-wing incumbents Gustavo Petro and Luiz Inácio Lula da Silva, raising the odds for more market-friendly outcomes next year – scenarios traders see as supportive for assets in the region.
“Where we are expecting change, it’s because electorates are frustrated with the incumbents,” said Graham Stock, senior emerging-markets sovereign strategist with RBC Bluebay. “That’s true in Chile, and probably in Colombia where Petro has disappointed.”
Limited influence
Emerging-market assets have broadly gained in 2025 as investors shift away from US markets amid policy volatility. Debt restructurings, progress on IMF deals and commodity rallies have also helped support assets. And proximity to the US leader has not always translated into benefits – India’s Narendra Modi, for example, has yet to clinch a trade deal with the world’s largest economy.
Still, Trump’s name has loomed large in developing markets. In Hungary, Prime Minister Viktor Orban has touted the possibility of an Argentina-like rescue – puzzling investors who are surfing one of the best rallies in emerging assets.
Eastern European currencies and Ukraine’s dollar bonds jumped on Monday as a top aide to Ukraine’s President Volodymyr Zelenskyy said Ukrainian and US negotiators had prepared an “updated and refined framework document on peace.” Trump had earlier proposed a November 27 deadline to secure Ukraine’s support for the plan to end the conflict with Russia, but that deadline isn’t set in stone, US Secretary of State Marco Rubio later said.
In Latin America, political recalibration around shifting US policy has even reached one of the world’s most distressed credits. A tougher stance from Trump toward Venezuela is boosting the country’s defaulted bonds, some of which have doubled in price as traders bet on the potential ouster of socialist leader Nicolás Maduro.
“The probability of regime change has become a lot higher – we’ve gone from no hope of anything changing to something closer to 50/50,” Gramercy’s Atanasov said.
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by Carolina Wilson, Vinícius Andrade & Liza Tetley, Bloomberg
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