How political cycles in LATAM affect your investments

Personal finances

12.1.2025 9:33 AM

Hapi

How political cycles in LATAM affect investment

Latin America is one of the most dynamic and volatile regions in the world.

For investors, this combination can be challenging, but it can also become a source of unique opportunities.

The key is to understand one decisive factor that moves markets more than almost any other: political cycles.

Unlike the United States or Europe, where electoral changes tend to maintain a certain institutional continuity, in LATAM each election can mean a drastic shift in economic policy, public spending, regulation, foreign investment and currency behavior.

If you invest from Colombia, Chile, Mexico, Peru, Argentina or any country in the region, understanding these cycles is essential to protect your portfolio and detect strategic moments to invest.

In this guide, step by step, I explain how political cycles work, why they affect your investments, and how to navigate volatility in an intelligent way.

Why politics in LATAM weighs more than in other regions

In Latin America, changes of government are often accompanied by very high expectations, profound reform projects and tensions between political and economic sectors.

This generates:

Sharp jumps in the local currency
Changes in capital flows
Increase or decrease in foreign investment
Volatility in stock markets
Revaluation of entire sectors of the economy

In addition, many countries in the region rely heavily on raw materials (copper, oil, lithium, gas, food), whose global prices also react to domestic political decisions.

In other words:

in LATAM, to invest without understanding politics is to invest blindly.

What is a political cycle and why does it matter to invest?

A political cycle is the period between:

Pre-elections
Election Day and Immediate Reaction
First months of the new government
Mandate consolidation and reforms
Before the next election cycle

At each stage they change:

Market confidence
Public Expectations
Fiscal policies
Interest rates
The exchange rate
The flow of foreign investment

Investors don't react to the government itself, but rather to the lack of clarity about the future.

Uncertainty can scare capitals or generate unexpected rallies depending on the election result.

The four moments in which politics moves markets

Pre-elections: the most volatile stage

Days or months before the elections:

The exchange rate tends to weaken
Markets are acting with caution
Investors move temporarily to safe haven assets
The country's financing costs are rising

Surveys and narratives influence more than economic data.

Election results: immediate reaction

When the winner is known:

There may be a rally if the market expected that result
There may be a crash if the result is surprising
Regulation-sensitive companies can move abruptly
Sovereign bonds can rise or fall depending on the country's risk

Latin America has extreme examples of both scenarios.

First 100 days: defining the course

Investors note:

The economic team (technical or political?)
The relationship with the private sector
The position on foreign investment
What reforms will be promoted
How quickly decisions will be made

This sets the tone for the rest of the government.

Second half of the term: stability or attrition

As the government moves forward:

If the economy improves, confidence increases
If it deteriorates, uncertainty increases
Reforms can be slowed down
The new electoral cycle is anticipated

How political cycles affect your investments

The local currency

It is the most politically sensitive asset.

In LATAM, during electoral cycles:

The dollar tends to rise
Coins lose value
Investors are hedged in strong assets

Examples:

Argentina and Chile have seen double-digit depreciations in elections.
Colombia has registered volatility of 10— 20% in short periods.

Local actions

They benefit or harm depending on:

Type of government
Proposed regulation
Expectation of taxes and subsidies
Relationship with the private sector

Typical sectors:

Energy, mining, banking → very sensitive to regulations
Consumer, retail → sensitive to macro weather

Sovereign bonds and country risk

They change immediately depending on:

Perception of stability
The country's payment capacity
Fiscal Policy and Public Spending

Increases in country risk affect everything: credit, debt, confidence.

Commodities

In LATAM, politics and raw materials are linked:

Lithium and copper: Chile, Argentina, Peru
Oil: Colombia, Mexico, Brazil
Soy and agriculture: Brazil and Argentina

Regulations, taxes or changes in tenders can move these markets.

Global Assets

When there is uncertainty, something common happens:

Latin American investors buy U.S. assets Department of State to protect capital.

Stocks such as Apple, Nvidia or S&P 500 ETFs work as a refuge from apps like Hapi.

Recent cases in LATAM

Argentine

Drastic changes in the economic model.
Strong devaluations before and after elections.
Historic opportunities during deep crises.

Chile

Constitutional process → volatility of the peso and the IPSA.
Debate on lithium and mining.

Mexico

Presidential elections → regulatory uncertainty in energy.
Dependence on trade with the U.S. UU.

Peru

Constant political instability, but surprising macroeconomic strength.

Colombia

Labor, pension and tax reforms affect market expectations.
Immediate reactions in the stock market and the dollar.

Smart strategies for investing in political cycles

Diversify outside your country

Global assets reduce the impact of local political risk.

Keep part of the portfolio in dollars

The dollar tends to strengthen during election cycles.

Don't invest out of emotion

Avoid reacting to headlines or social media.

Markets are rapidly panicking.

Focus on sectors, not discourses

Each government favors some sectors and affects others.

Take advantage of volatility

Heavy falls can be historic entry-level moments.

Use tiered purchases (DCA)

Reduce risk by averaging prices.

Checklist: What to watch for in each political cycle

Surveys and trends
Economic rhetoric from candidates
Dollar reaction
Central bank movements
Country risk
Names of the economic cabinet
Mining, Energy and Foreign Investment Sector
Debt Rating Agencies (Moody's, S&P, Fitch)

Cómo abrir mi cuenta en Hapi

Guía rápida paso a paso

1

Regístrate en Hapi

Descarga la app de Hapi en Google Playstore o App Store, o desde la página web. Regístrate completando todos los pasos del formulario y verifica tu identidad.
2

Añade fondos a tu cuenta

Haz un depósito inicial en tu cuenta. No hay cantidades mínimas, permitiéndote comenzar con cualquier monto.
3

Elige cuánto invertir

Usa el buscador en Hapi para encontrar tus acciones favoritas. Luego selecciona “Comprar”, revisa el precio y confirma la compra.
4

Maneja tus inversiones

Accede a tu portafolio en la app o versión web y monitorea el rendimiento de tus acciones. Podrás comprar y vender fácilmente siempre que quieras.

Consejo: define un monto objetivo y usa compras periódicas para promediar tu costo de entrada.

Conclusion: Politics changes, but a good strategy remains

Political cycles in LATAM are inevitable.

But they don't have to destroy your portfolio.

If you understand how they work, diversify correctly and maintain a global vision, you can:

Reduce risk
Take advantage of opportunities
Create a strong and resilient portfolio
Investing even in turbulent times
Benefit from the region's natural volatility

With information, discipline and modern tools, investing in LATAM even during intense political cycles can transform from a threat... to a strategic advantage.

Important Disclosure

This article is provided for informational and educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities or investment products. Nothing herein should be construed as investment, financial, tax, or legal advice, nor as a recommendation of any security, investment strategy, or account type.

Hapi Corp. is the parent company of Hapi Securities, LLC, a U.S. SEC-registered broker-dealer and member of FINRA/SIPC. Any discussion of securities or financial products in this article is for general informational purposes only and may not reflect the views of Hapi Securities, LLC.

Investing in securities involves risk, including possible loss of principal. Past performance does not guarantee future results. Securities products are not FDIC-insured and may lose value.

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