Mauricio Alvarez, head of Latin America at OTG, highlights that regional equities continue to trade at significant discounts relative to global peers, with key benchmarks reflecting undervaluation despite macroeconomic headwinds. The outlook underscores opportunities for long-term investors.
- MSCI Latin America Index trades at 10.2x P/E, 45% below global developed market average of 18.7x
- Regional earnings growth projected at 6.3% for 2026, outpacing global average of 4.1%
- Brazil’s S&P/B3 Index up 12.4% YTD, Chile’s IPSA outperformed MSCI EM by 3.7 p.p. over 12 months
- Foreign portfolio inflows into Latin American equities rose 22% in Q1 2026
- OTG’s Latin America fund saw $430 million in net inflows and ESG integration now at 58% of portfolio
- Mexican peso appreciated 8.3% against USD over six months, supporting equities
Latin American equities continue to present compelling valuation opportunities, according to Mauricio Alvarez, senior executive at OTG, citing persistent discounting against global indices despite improving fundamentals. As of early January 2026, the MSCI Latin America Index traded at a price-to-earnings ratio of 10.2x, well below the global developed market average of 18.7x and the emerging markets composite of 14.5x. This 45% discount to global peers signals a potential mispricing, particularly given regional earnings growth projections of 6.3% for 2026, above the global average of 4.1%. Alvarez emphasized that structural reforms in countries such as Brazil, Colombia, and Chile—ranging from pension overhauls to energy sector modernization—have bolstered investor confidence. In Brazil, the S&P/B3 Index has risen 12.4% year-to-date, driven by improved corporate governance and inflation stabilization. Meanwhile, Chile’s IPSA index has outperformed its regional peer, the MSCI Emerging Markets Index, by 3.7 percentage points over the past 12 months, despite high interest rate environments. The resilience of local currencies, particularly the Mexican peso and Brazilian real, has further supported equity performance. The peso has appreciated 8.3% against the U.S. dollar over the last six months, while the real’s real effective exchange rate has remained stable, reducing currency risk for foreign investors. These trends have contributed to a 22% increase in foreign portfolio inflows into Latin American equities in the first quarter of 2026, according to internal firm data. Market participants, including institutional allocators and hedge funds, are increasingly repositioning capital toward the region. OTG’s Latin America-focused fund has seen net inflows of $430 million since January, with allocations concentrated in financials, infrastructure, and consumer discretionary sectors. The fund’s exposure to companies with strong ESG integration has also grown to 58% of its portfolio, reflecting evolving investor priorities.