LatAm Re-Rating, Brazil First
Nidhal Selmi@nselmi
−0.6%
since Oct 6
The idea
I believe a market-friendly outcome in Brazil's election becomes the starting point for a longer re-rating of Latin American assets as local rates ease and global capital rotates toward cheap markets. Brazilian banks are the conviction core since they move most with rates and sentiment, backed by state-linked names as the direct election play, with Mexican nearshoring winners, Argentina's reform trade, and regional compounders layered around that core.
What it owns
- Brazilian banks benefit most directly if the election outcome brings a market-friendly government and local interest rates decline. · Itaú UnibancoBrazil's largest private bank gains the full benefit if the election produces a market-friendly government and local rates fall., Nu HoldingsThe digital bank benefits both from a near-term post-election lift and from longer-term gains as its customer and revenue growth continues across Brazil and Mexico., Banco BradescoThe most beaten-down large Brazilian bank has the most room to re-rate if a market-friendly election outcome and falling rates lift the sector broadly., XP IncThe broker earns more when Brazilians shift money from fixed income into stocks and funds as rates fall and equity demand rises., Banco Santander BrasilLower Brazilian rates mean cheaper funding and more lending opportunity, making the bank a direct play on interest rate cuts and a market-friendly election.32%
- Large Latin American businesses compound through the broader re-rating of the region regardless of which country's election dominates near term. · iShares Latin America 40 ETFIt holds the largest Latin American companies in one fund, so it captures the general re-rating of the region's risk assets as global capital rotates toward cheaper markets., Mercado LibreIts commerce and fintech growth across Latin America compounds through the take's multi-year horizon regardless of any single election outcome., ValeThe Brazilian heavyweight pays dividends while the broader re-rating plays out and benefits if a friendlier government eases interference in large companies.23%
- Mexico captures durable gains from supply chains moving closer to the US, a structural shift independent of Brazil's political outcome. · Fomento Económico MexicanoMore nearshoring jobs and higher wages in Mexico drive higher spending at its stores as the structural shift in supply chains continues., CemexThe company sells the cement for factories, roads, and warehouses that Mexico's nearshoring wave requires as supply chains shift closer to the US., Grupo Aeroportuario del PacíficoMore factories and business travel from Mexico's nearshoring boom mean rising passenger volumes through its airport network.14%
- The same market-friendly turn that the Brazil bet rides is already underway in Argentina. · Grupo Financiero GaliciaArgentina's largest private bank re-rates sharply from a very low base if the country continues stabilizing under market-friendly reforms., Vista EnergyThe focused Vaca Muerta shale producer grows output without the state baggage that weighs on larger, state-linked competitors., YPFArgentina's energy giant turns Vaca Muerta shale into real production and exports as market-friendly reforms open the energy sector to investment.10%
- State-linked companies re-price fastest when markets stop pricing in the risk of political interference in operations and pricing decisions. · PetrobrasLess state interference in fuel pricing and dividends under a market-friendly government would re-rate the stock independent of commodity moves., SabespThe privatized utility shows that market-friendly governance works in Brazil and continues re-rating as privatization momentum stays on track.10%
- Cash10%