How to Invest in Latin America

While North American stocks – primarily US stocks – hold a prominent place in many investment portfolios, stocks from Central America and South America have a very marginal presence. In this guide, moneyland.ch answers the most important questions about investing in Latin America.

What makes Latin America interesting for investors?

Some investors see Latin America as a good investment. Some of the reasons why Latin America may appeal to investors are:

• Potential for growth: Latin America is generally considered to be a region with high potential for economic growth. 
• Raw materials: Many Latin American countries are rich in raw materials, including materials that are expected to experience high demand in the future, such as copper. The region now plays a key role in the supply of commodities, and is well positioned to benefit from climbs in the prices of raw materials.
• Diversification: Latin American countries are generally considered to be emerging markets. They are hardly represented in most global indexes, or are not included at all. For example, the weighting of Latin American countries in the FTSE World Index is just 0.77 percent (as per April 30, 2025). Indexes that only track the stock markets of developed countries, like the MSCI World, do not include Latin America at all. For that reason, targeted investments in the Latin American stock market can help to diversify your stock portfolio.

Which stock indexes are there?

There are several stock indexes that track the Latin American stock market. These include:

• The MSCI Emerging Markets Latin America is a sub-index that encompasses all of the Latin American stocks included in the MSCI Emerging Markets index. Another version of this sub-index, the MSCI Emerging Markets Latin America 10/40 limits the weighting of each company in the index to a maximum of 10 percent, and limits the total, combined weighting of all companies with a weighting of between five and 10 percent to 40 percent of the index. In practice, these limitations make little difference, and the makeup of this index is practically identical to that of the MSCI Emerging Markets Latin America (as per May 2025).
• The S&P Latin America 40 is made up of the most important companies in Latin America. Currently, it includes 41 different stocks - rather than the 40 stocks that its title would lead one to believe. It covers around 70 percent of the region’s total market capitalization.
• The Stoxx Latin America Total Market Index combines the biggest and most important Latin American companies. The stocks tracked by this index collectively make up around 95 percent of the region’s total freefloat market capitalization.

Can I invest in Latin America using ETFs?

Yes. There are exchange-traded funds (ETFs) that replicate most of the indexes outlined above. These funds, which are traded on stock exchanges, passively track an underlying stock index. The annual fees, shown as the total expense ratio (TER), are deducted directly from the fund’s assets.

ETFs are traded on stock exchanges, just like most stocks are. You can buy and sell shares in ETFs during trading hours using a stockbroker. Your stockbroker charges you brokerage fees. The costs vary broadly between stockbrokers, so it is advisable to compare stockbrokers on moneyland.ch before you invest. You can find useful information about the domiciles, dividends, and replication methods of ETFs in the checklist for choosing an ETF.

Which alternatives are there to ETFs?

In addition to ETFs, you can also invest directly in the individual stocks of Latin American companies. You should be aware though, that the risk of losing money is much higher when you invest in just a few stocks, compared to investing in a broadly-diversified ETF. On the other hand, buying individual stocks can be a way of adding companies to your portfolio that are not tracked by the indexes and ETFs shown above.

Actively-managed mutual funds are another alternative. But you should bear in mind that actively-managed mutual funds typically have much higher ongoing fees than passively-managed ETFs. There is no guarantee that an actively-managed fund will perform better than an ETF that simply replicates a stock index.

Which risks and disadvantages should I be aware of?

Investing in securities like stocks and ETFs always comes with risks. There is no guarantee that your investments will make a return, and there is always a chance of making heavy losses. In addition to the basic risks that apply to all stock investments, there are also a few special risks that apply to Latin America specifically:

• Poor diversification: While a Latin America ETF can be suitable for diversifying your investment portfolio, the indexes that these ETFs replicate are themselves poorly diversified. Most Latin America indexes include stocks from just a handful of countries, and Brazil always takes a dominant role (similar to the way US stocks dominate global indexes).
• Dependence on raw materials: The abundance of Latin America’s natural resources has a down side as well, in that many of these countries are heavily dependent on the commodities markets. The economies of many Latin American countries tend to suffer when the prices of copper, silver, and other raw materials goes down.
• Political risks: The countries of Latin America vary broadly in terms of political stability and orientation. Political decisions, or more serious events like civil unrest and crises, can negatively impact your investments.

Is investing in Latin America profitable?

A performance comparison of an ETF that replicates a Latin America index and an ETF that replicates the global index MSCI World clearly shows that a global portfolio of developed world stocks has performed better than Latin American stocks in the past. The difference is especially pronounced over a 10-year term.

Important: Historical performance data is not an indicator of future performance. Do not base future investment decisions on predictions based on past performance. Both exceptional gains and exceptional losses are theoretically possible at any time.

Note: This article is provided for informational purposes only, and should not be considered as investment advice. The publisher does not accept any liability in connection to this publication.

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