Daniel KernerManaging Director, Dinámica Global Insights · Readout of the subscriber call on Latin American geopolitics, macro risk, and U.S.–global crosscurrents.
Executive summary
1
The external environment is becoming harder for Latin America. Higher yields, a stronger dollar, and inflation pressures are constraining central banks and increasing political pressure on incumbents.
2
Colombia faces substantial obstacles to reform. Fiscal stress, a fragmented Congress, insecurity and limited governing experience complicate the new administration’s ability to deliver.
3
Brazil’s rightward shift creates opportunities without guaranteeing deep fiscal reform. Congressional gains strengthen the conservative agenda, but fiscal adjustment will compete with judicial, security, and family-related priorities.
4
Alignment with Trump has limits. Closer ties can support security cooperation and investment, but they do not remove structural trade disputes or exposure to a changing U.S. political cycle.
Global and U.S.
Global markets
Global financial conditions
Rising yields are increasing financial uncertainty. Inflation associated with the Iran war, fiscal pressures, and market dynamics are raising financing costs. There are growing questions over U.S. economic resilience and the AI-driven equity rally.
France is a growing source of concern. High yields, protests and political uncertainty ahead of next year’s election add to the risk of wider European stress. A new crisis is far from inevitable, but there is little prospect of a quick resolution to global fiscal and inflation pressures.
Regional central banks face a more difficult trade-off. Currency weakness and inflation, compounded by factors such as El Niño, constrain further easing. Colombia’s rate increase contrasted with a more cautious approach elsewhere. Higher living and borrowing costs are hurting U.S. Republicans ahead of the midterms.
Latin America
Colombia · Venezuela
Colombia and Venezuela
Colombia’s starting conditions are unusually difficult. The Abelardo de la Espriella administration inherited deep polarization, fiscal stress, and a loss of territorial control to armed groups. The earthquake shortly after the inauguration added an immediate test. The initial response mobilized public and private support, but weak infrastructure on the Pacific coast and frustration over delivery remain challenges.
A durable reform coalition will be difficult to consolidate. The president arrived with little party representation and lost an early contest over the Senate presidency. Congressional fragmentation, the single-term presidency, limited administrative experience, and an active opposition led by Gustavo Petro all constrain his room to maneuver. Fiscal limits also make it harder to build support in a transactional Congress.
Security is the administration’s clearest political priority. More aggressive operations and highly visible messaging aim to demonstrate a break with the previous government. Participation in the Shield of the Americas and reported U.S. drone deployments point toward deeper cooperation. Meanwhile, disputes with business-association leaders raise questions about relations with the economic establishment.
Strong ties to Trump do not substitute for bipartisan ties to Washington. Colombian right-wing involvement in U.S. partisan politics has generated resentment among Democrats. A shift in congressional control could make that exposure more consequential, despite broad Colombian support for a strong U.S. relationship.
Trade ambitions center on competitive parity; mineral opportunities face security constraints. Colombia is seeking tariff relief through a reciprocal arrangement rather than expecting full elimination. Critical minerals could attract U.S. interest, but illegal armed groups control much of the relevant territory in Colombia and Venezuela, complicating access and implementation.
Venezuela-related deals would be a priority for Democratic oversight. A Democratic House, or House and Senate, would likely be more active in investigations than in legislation. Scrutiny would focus on alleged private benefits from U.S. government action and the lack of a meaningful democratic transition, increasing political pressure on the administration and Marco Rubio.
Brazil
Brazil’s political shift and reform prospects
The first round changed the political outlook beyond the presidential contest. Flávio Bolsonaro’s roughly 47–45 lead reversed conventional expectations. His PL also displaced significant parts of the center-right and the left. Conservative strength in Congress would constrain a Lula presidency even if he won the runoff.
The result is a potentially generational rightward shift. Conservatism, linked to evangelical Christianity and social values, has become more nationally organized. Lower-middle-class voters and smaller cities were central to the PL’s gains. The PT’s more limited geographic reach and lack of an obvious successor to Lula could reinforce that shift.
The judiciary is central to the next phase. A conservative Congress and future Supreme Court appointments would give a Bolsonaro government greater institutional influence. Amnesty or other relief for Jair Bolsonaro, attempts to remove justices, and confrontation with the judiciary will become major priorities.
There is an opening for reforms that have been delayed for decades. The positive reaction reflects expectations of a friendlier business environment and progress on fiscal, tax, and administrative problems. However, the movement’s populist elements, longstanding spending commitments, and patronage practices remain obstacles.
Fiscal ambition will probably be diluted by competing priorities. Spending cuts would be politically painful, especially for the lower-middle-class voters who helped drive the result. Public security, judicial influence, and relief for Jair Bolsonaro will take precedence.
A vote against crime and corruption is not necessarily a mandate for austerity. Underlying voter frustration was visible even where polls missed the result. If reforms do not generate growth, popular support could weaken.
Financial services and agriculture would benefit from a friendlier environment. Sectoral gains need not depend on the full delivery of an ambitious fiscal package. Further tax changes could also address exemptions that weakened the benefits of previous reform. A return to the early hostility toward China seen under Jair Bolsonaro would put an essential commodity-export relationship at risk, but it looks unlikely.
U.S. security cooperation could expand substantially. A Flávio government would likely join the Shield of the Americas and deepen cooperation in intelligence, law enforcement, military, and financial intelligence. Whether the initiative will bring financing remains uncertain.
Critical minerals offer a significant strategic opportunity.Brazil’s mineral potential and more accessible conditions in some regions make it a candidate for closer cooperation with the United States, Europe and Japan. Building supply chains independent of China remains a complex multinational undertaking rather than a quick result.
Amazon policy could complicate relations with Europe. Vague development proposals have already raised concerns about a return to policies associated with Jair Bolsonaro. Environmental disputes could hurt progress on the EU–Mercosur agreement.
Trade gains with Washington are likely to be negotiated and limited. Brazil would seek more exemptions and a lower tariff floor to improve its position relative to competitors. But ideological alignment alone does not guarantee preferential treatment. Structural trade tensions and the durability of agreements remain unresolved. A change in the U.S. congressional balance would add another layer of political uncertainty.
