Latin American Currencies Rise as Easing Global Trade Tensions Lift Sentiment

The global trade landscape has shifted dramatically in 2025, with easing tensions between the U.S. and its major trading partners creating new opportunities for Latin American currencies. After years of volatility, the region is now seeing a gradual recovery in currency valuations as trade barriers decline, nearshoring gains momentum, and commodity prices stabilize. This article explores how these dynamics are reshaping investment prospects in Latin America.

Trade Policy Shifts: A New Era of Stability

The U.S. decision to maintain a baseline 10% tariff on most Latin American imports, while pausing harsher measures for 90 days, has reduced the region’s exposure to the global trade war. Mexico, which previously faced punitive tariffs on non-USMCA-compliant goods, has seen its recessionary pressures ease as the threat of further penalties recedes. Meanwhile, exemptions for critical minerals—such as Chile’s copper and Argentina’s lithium—have bolstered export revenues, stabilizing currencies like the Chilean peso (CLP) and the Argentine peso (ARS).

The removal of uncertainty has also spurred investment in trade-sensitive sectors. For example, shows a rebound in production activity, driven by nearshoring from Asia. U.S. firms like Walmart have invested $700 million in Guatemalan manufacturing, leveraging lower labor costs ($1.50–$2.50/hour) compared to China’s $4/hour.

Currency Performance: Winners and Losers

While the region’s currencies remain mixed, select nations are outperforming expectations:

1. Brazil (BRL):
   The real has strengthened by 5% against the dollar since March 2025, buoyed by rising agricultural exports to the U.S. Brazil’s soybean and coffee shipments have surged, capturing market share lost by Chinese competitors. highlight a 12% increase, supporting the BRL’s recovery.

2. Chile (CLP):
   Copper prices stabilized at $3.80/lb in May , up from $3.20/lb in early 2025, as U.S. demand for critical minerals offset China’s slowdown. The CLP has appreciated 3% against the dollar year-to-date, with analysts forecasting further gains if copper stays above $4/lb.

3. Mexico (MXN):
   Despite a technical recession, the peso has held steady near 21.5 MXN/USD, up from 22.0 MXN/USD in Q1. While the Bank of Mexico’s rate cuts (now at 7.25%) weigh on the currency, falling inflation (to 3.5% in May) has reduced depreciation risks.

4. Argentina (ARS):
   The peso remains fragile, but its stabilization at 1,100 ARS/USD (down from 1,425 ARS/USD in 2024) reflects IMF-backed reforms and reduced tariff risks.

Structural Opportunities: Beyond Tariffs

The region’s appeal extends beyond trade policy shifts. Three long-term trends are driving investor optimism:

1. Nearshoring Boom:
   Latin America’s proximity to the U.S. and competitive labor costs are attracting manufacturing investments. Mexico’s auto sector, for instance, now supplies 40% of U.S. imports, with rising 18% year-to-date.

2. Commodity Resilience:
   Chile and Peru’s lithium reserves, crucial for EV batteries, are in high demand. Chile’s lithium exports to the U.S. rose 25% in Q1, supporting fiscal stability.

3. Debt Relief:
   Argentina’s IMF deal has reduced capital flight risks, while Peru and Colombia have slashed public debt-to-GDP ratios to 35% and 55%, respectively, from pandemic-era peaks.

Risks and Caution Flags

Despite the positive momentum, risks remain:

• China Slowdown: Brazil’s iron ore and Chile’s copper exports face headwinds as China’s growth dips to 5%.
• Inflation Lingering: Brazil and Colombia’s core inflation remains above targets, limiting rate cuts.
• Geopolitical Volatility: U.S. tariffs could resurge if trade talks with China falter.

Conclusion: A Cautioned Optimism

Latin American currencies are on the mend, with select economies like Brazil and Chile poised for further gains. The region’s growth forecast of 2.0% in 2026—up from 1.4% in 2025—reflects improving sentiment. However, investors must balance optimism with caution: diversify into commodity exporters (CLP, BRL) and nearshoring hubs (MXN), while monitoring China’s demand and U.S. policy shifts.

The data underscores a turning point: after years of turbulence, Latin America is no longer a passive bystander in global trade—it’s now a strategic player capitalizing on its unique advantages. For investors, this is a story of resilience, not retreat.