Latin America’s 2026 Economic Inflection

2026 Outlook for Latin America

We maintain a positive outlook on Latin America and are currently executing this strategy through two primary channels, directed exposure to Chile’s copper capacity through Antofagasta PLC (ANFGF) and broad industry exposure to Brazil through the iShares MSCI Brazil ETF (EWZ). The region offers a combination of structural reform, essential resource leverage, and faster growth potential compared to many global peers. While broader emerging markets face varied challenges, the core economies of Latin America are positioning themselves as critical hubs for the next phase of the global digital and industrial buildout.

Chile’s Strategic Pivot and Copper Dominance

The Chilean economy is benefiting from a pivot toward more market friendly fiscal policies following the elections in December, which has fostered global alliances and economic reforms. The Central Bank of Chile is expected to prompt further rate cuts as inflation surprises to the downside, supporting domestic firms in mining, digital infrastructure, and technology sectors.

While monetary policy will provide benefit broadly across industries, our core exposure is centered on Chile’s global dominance in the materials that power the future. As the world’s largest copper producing country, Chile accounted for 24% of global copper production in 2025.¹ This leadership position is critical because Chile is perfectly poised to benefit from the AI revolution and the massive global buildout of data centers. Copper prices have increased over 29% year over year², driven primarily by the intense demand for digital infrastructure and AI hardware. This highlights the nation’s strategic importance extends beyond a single metal to its role as a vital link in the global supply chain.

Brazil’s Scale and Monetary Opportunity

Brazil stands out as a main destination for capital, characterized by an accelerating growth driven by a diversified base spanning consumer, agriculture, mining, and energy. The region currently presents a rare window of opportunity where valuations remain low with improving fundamentals. As the dominant economic force in Latin America, the nation draws strength from a robust and varied industrial base that includes everything from agriculture and mining to a surging consumer class.

The Monetary Pivot

Brazil is currently at the threshold of a significant decline in real rates, moving away from previously restrictive levels. While fiscal stimulus remains constrained by budget limitations, a package of measures totaling approximately R$160 billion is expected to contribute up to one percentage point to GDP growth in 2026.³

Household consumption is projected to be the primary driver of the Brazilian economy in 2026, with an expected expansion of 2.1%.⁴ This resilience is supported by low unemployment and consistent real wage gains, partly driven by increases in the minimum wage. Additionally, new fiscal measures, such as income tax exemptions for individuals earning up to R$5,000 per month, are expected to boost real household disposable income by 3.6%.⁵ While restrictive interest rates continue to weigh on traditional investment, the high propensity to consume among these beneficiaries ensures that domestic demand remains a robust pillar for the economy throughout the year.

AI and Productivity

This monetary setup is ideal for Brazil’s AI and energy transition. The buildup of data centers, transmission lines, and rare-earth processing facilities are long-duration, capital-intensive assets whose valuations are acutely sensitive to real discount rates. Even modest declines in real rates can materially lower the cost of capital and unlock equity re-rating potential across infrastructure-linked assets.

The development of artificial intelligence is important as it reduces the marginal cost of production across services, logistics, and knowledge work. This deflationary impulse interacts with a labor market characterized by low unemployment, expected to remain around 6.6% in 2026 ⁶, and consistent real wage gains. AI acts as a deeply democratizing force that accelerates efficiency and compresses costs, which may help suppress broad-based inflation even as wages rise. For a country like Brazil, where high interest rates have historically embedded a large inflation premium, AI-driven productivity gains could lead to a structural divergence where realized inflation stays lower than the “inflation fear” priced into current rates.

The Super Commodity Cycle and Green Compute Arbitrage

Unlike the US and Europe, which face power-grid bottlenecks and rising costs, Brazil’s excessive renewable generation capacity is scaling well beyond domestic demand. As compute and power constraints become binding global limits, Brazil’s ability to provide abundant, affordable energy for multi-gigawatt data-center campuses turns its long-held potential into a tangible inflection point for 2026. Brazil is no longer merely a supplier to the AI buildout; it is becoming a host economy for AI itself. As compute and power constraints become binding global limits, Brazil’s ability to provide abundant, affordable energy turns its long-held potential into a tangible economic inflection point for 2026.

Breaking the Rare-Earth Monopoly

While often framed as a software revolution, artificial intelligence is fundamentally a mineral-intensive industrial transformation. The AI stack is largely built on rare earth metals, which is dominated by China, maintaining 70% of global production and 90% of processing capacity.⁷ Recognizing this vulnerability, the United States has dramatically shifted its positioning on national security, with President Trump announcing a $10 billion strategic critical minerals stockpile on Monday. This U.S. push for resource sovereignty extends beyond domestic stockpiling to aggressive global positioning.

Brazil, holding the world’s second-largest proven reserves of rare earths, is a centerpiece of this Western diversification strategy. The country is successfully transitioning from geological potential to industrial execution with major projects like Serra Verde, which recently secured $465 million in U.S. financing, and the Colossus deposit in Minas Gerais.⁸ By positioning itself as a critical non-Chinese resource for these essential materials and pursuing joint ventures for downstream processing, Brazil is capturing a greater share of the AI industrial surplus while offering a vital, geographically diversified hedge against global supply-chain risks.

Brazil and Chile Position of Strength

Brazil and Chile represent a convergence of macro stability and structural transformation that positions them as the physical necessity for the next decade of global growth. The iShares MSCI Brazil ETF (EWZ) features top sector weights in Financials at 39.2%, Energy at 15%, and Materials at 14.1%. For those looking at the iShares Chile ETF (ECH), its top sector weightings consist of Financials at 26.6%, Materials at 17.2%, and Industrials at 14.1%. By leveraging falling real interest rates, a robust renewable energy matrix, and a dominant position in the critical mineral supply chain, these nations have evolved from simple commodity plays into AI native host economies.

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Sources:

1. UBS: Commodities “Copper 101”, as of January 26, 2026 ↩︎
2. Bloomberg, as of February 4, 2026 ↩︎
3. Brazilian Institute of Geography and Statistics, as of November 19, 2025 ↩︎
4. Brazilian Institute of Geography and Statistics, as of November 19, 2025 ↩︎
5. Bradesco: 2026 Economic Insights, as of November 19, 2025 ↩︎
6. Brazilian Institute of Geography and Statistics, as of November 19, 2025 ↩︎
7. Bloomberg Intelligence, as of March 21, 2025 ↩︎
8. Bloomberg, as of November 7, 2025 ↩︎

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