In a Year of Uncertainty for Latin America, Investors Swore by These Research Providers

BTG Pactual extends its reign in II’s Latin America Research Team.


Illustration by II

Another election cycle meant another year of ambiguity for investors in Latin America.

Both Brazil and Colombia held presidential elections in 2022, with the latter country having an unpredictable race that resulted in a narrow runoff victory for former rebel Gustavo Petro. “Because these election processes are always a bit messy, the political environment was a little more complicated in the second part of last year,” said Carlos Sequeira, head of research at BTG Pactual. “This ended up preventing markets from performing that well and also reduced the interest of investors in general in the region.”

JPMorgan’s chief global equity strategist and head of Latin America equity research Dubravko Lakos agreed. “On politics, the biggest obstacles are the election cycles. Constituents in the region are electing presidents who advocate increased government policy support for businesses and social transfers compared to their previous counterparts,” he said. “Deterioration in fiscal accounts could drive higher equity risk premia.”


At the same time, Latin American markets are highly influenced by the rest of the world. Over the year the three biggest developments included the increase in U.S. interest rates, the Russia-Ukraine conflict, and the reopening of China, according to Claudio Irigoyen, who previously headed up all of the Latin America research teams for BofA Securities and has now been named the firm’s new head of global economics.

“LatAm depends heavily on the global backdrop as most countries are commodity exporters with exposure to China, with the exception of Mexico that is tightly linked to the U.S. and competes with China in the U.S. market,” he said. “Since most countries have relatively low saving rates, LatAm favors when global growth is driven by China rather than the U.S. Therefore, higher U.S. rates and/or a sharp recession that could trigger a flight to quality are the biggest concerns for investors in the short term. Longer term, geopolitical issues are becoming increasingly important for asset allocation.”

And when it comes to the top research firms in the region, investors are also taking a longer-term approach. The buyside has once again stuck with the same trio of sell-side firms, according to Institutional Investor’s 31st annual Latin America Research Team.

More than 900 directors of research and investment professionals across roughly 500 asset management firms with significant securities holdings in Latin America have elevated BTG Pactual to the No. 1 spot for the third year in a row.

BofA Securities improved from 2022’s third place to take second in this year’s ranking. Only one team position separated it from BTG Pactual’s 25, after BofA added 8 total team positions on 2022 for a total of 24.

JPMorgan was close behind, taking third with 23 team positions. Itau BBA and Bradesco BBI placed fourth and fifth, respectively.

In line with other II surveys, participants rated the top firms across 25 sectors and then separately rated individual analysts, economists, and strategists at those firms to create two distinct rankings for each sector. Two additional leaderboards were created by weighting the responses by assets under management, which mirrored these commission-weighted results.

BTG Pactual’s Sequeira reported that his team — already one of the most senior in the region — once again experienced little turnover. “I think it’s natural to have changes in the junior level but for the past few years, nobody has switched groups and this is good because they get more experience,” he said. “So I think with anything, our team became even more senior because of our associates.”

At BofA Securities, there is a team of economists, strategists, and equity analysts covering 15 countries based in New York, Sao Paulo, and Mexico City. Irigoyen credited his firm’s approach in the region to its increased market share. “Different from the trend in the industry, we have been hiring senior analysts and upgrading the coverage in key sectors, which allowed us to increase the market share and the number of ranked positions as clients value the investment in human capital and the commitment to the region,” he added.

At JPMorgan, meanwhile, the research footprint surpasses 235 companies and should grow larger in 2023, according to Lakos. “We remain committed to developing on-the-ground insights in the region with research analysts located in São Paulo, Santiago, Mexico City, New York City, and London,” he said. “We are back on the road with regular road shows to LatAm-based and global clients and hosting in-person flagship conferences such as the Brazil and Mexico opportunities conferences.”

Mexico became an important part of the conversation this year as the nearshoring trend of moving of business operations to a closer country became more acute.

“Because of these geopolitical tensions between the U.S. and China, what is happening in the globe is that the production chains have basically divided in two,” said Sequeira. “One chain, the Americas, is serving the U.S., and one chain on the east side of the world to serve China. Mexico, because it already had all the trade agreements lined up and it is very close to the U.S., should benefit the most. Several U.S. companies are already operating out of Mexico, so I think that it became even more clear that Mexico is going to play a very big role in becoming the main provider resource for the U.S.”

Looking forward, Latin America has a great opportunity to be one of the winning regions in a world where geopolitical tension might escalate, according to BofA’s Irigoyen. “The region can benefit as commodity exporter not only of traditional commodities such as copper and grains, but also as a producer and exporter of ‘new commodities’ essential for the new world such as lithium,” he said. “It remains to see how the recent pink wave ends up affecting investor confidence, but everything indicates that the worst-case scenarios that market participants envisioned some time ago are not low probability events.”