The Contrarian's Edge: Betting on Latin America's Commodity Powerhouses Amid Tariff Storms

The U.S. tariff regime has turned Latin America into a chessboard of geopolitical risk and opportunity. With the July 9 deadline looming for tariff exemptions, the region's currencies and equities are caught in a tempest of uncertainty—but that's where the contrarian shines. Let's dissect how the Chilean peso (USDCLP) and Colombian peso (USDCOP) are offering asymmetric risk-reward plays, and why you should avoid Brazil and Peru while pouncing on select equities tied to commodities and semiconductors.

Why Chile's Peso (USDCLP) is a Contrarian Buy

Chile's fate is tied to copper, the “golden metal” of the Andes. With copper prices hovering near $3.80/lb—bolstered by U.S. exemptions under free trade agreements—Chile's currency has a built-in floor. But here's the twist: the peso is undervalued relative to its commodity underpinnings.

Action Alert: Buy USDCLP now. Short-term traders can pair this with put options on Chilean equities like Antofagasta (ANTO) to hedge against a tariff reinstatement shock. If copper stays above $3.50/lb, the CLP could rally 10% by year-end.

Colombia's COP: Oil-Driven Resilience

Colombia is the China darling of Latin America. With crude oil exports at $75/barrel and 10% of GDP tied to Chinese demand, its currency is insulated from U.S. tariffs. Even as inflation nudges the central bank to pause rate cuts, oil's stability creates a sweet spot for contrarians.

Play: Overweight Colombian equities like Ecopetrol (EC). The COP is down 5% YTD but could rebound if China's demand surges post-tariff pause.

Tech/Semiconductor Plays: Mexico's Hidden Hedge

The U.S. auto industry's reliance on Mexico's manufacturing base is no accident. Under USMCA, automakers must source 85% of parts regionally—and semiconductors are critical. While tariffs on imported chips loom, Mexico's nearshoring boom is a lifeline.

Buy: Grupo México (GMEXICMO) isn't just a mining giant—it's a logistics powerhouse feeding Mexico's auto supply chains. For pure semiconductor exposure, look to Renesas Electronics (6798.T), which supplies chipsets to U.S. auto plants in Mexico.

Why to Underweight Brazil and Peru

• Brazil: Soy and coffee have buoyed the real (BRL), but governance failures and fiscal slippage are kryptonite. Avoid equities like JBS (JBSS3.SA) until reforms materialize.
• Peru: Lithium stocks (e.g., SQM (SQM)) face double jeopardy—U.S. tariffs on energy metals and internal political gridlock.

The Contrarian's Bottom Line

• Buy USDCLP and USDCOP now. Both are oversold and leveraged to commodities with China/US trade buffers.
• Go long Colombia's oil stocks (EC) and Mexico's auto/tech plays (GMEXICMO, 6798.T).
• Avoid Brazil/Peru until structural risks fade.

The July 9 tariff deadline is a catalyst—act before the storm breaks. This isn't about following the herd; it's about betting on what the market's missing: Latin America's commodity superpowers.

Jim's Take: When the world is scared, be greedy. The CLP and COP are the contrarian's ticket to asymmetric gains. Don't miss the train!