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This Viewpoint is a follow-up to our previous analysis, Buckle up for 2026!, which unravels the turbulent political and economic storms shaking Latin America.
The region is entering 2026 in an environment where global competition for energy, critical minerals and strategic supply chains has become central and supply chains are being restructured. These shifts are not about deglobalization, but about re-globalization along new lines. The pursuit of cheap raw materials, low-cost labor and new consumer markets remains intense — as demonstrated by recent moves by the US military in Venezuela and US President Donald Trump’s subsequent speech — and securing these resources is increasingly influenced by geopolitics, institutional risk and regulatory fragmentation. With its large resource base and growing consumer class, Latin America is both a beneficiary and a pressure point in this transition.
In the 1990s and 2000s, modular supply chains enabled firms to source inputs from the most efficient global suppliers. Today, that model faces challenges. Increased political risks, such as tariffs, sanctions and export controls, have made open-market sourcing less dependable. In response, companies are adopting captive and hierarchical governance structures. For example, Brazilian mining companies are investing in downstream smelting and battery manufacturing. In the pulp and paper industry, recent mergers such as the formation of Smurfit Westrock and the Suzano and Kimberly-Clark joint venture, illustrate that this trend is widespread across commodities. These actions reflect a broader pattern: as transaction costs rise, firms tend to internalize risk by tightening control.
The United States has shifted from a rules-based trade system to a more transactional approach. In 2025, President Trump imposed 50% tariffs on Brazilian exports, exempting only a few strategic commodities, such as pulp and orange juice. In response, Brazilian producers redirected shipments to Asia and South America, although they often had to accept lower margins. Additionally, Mexico, while benefiting from nearshoring, faced pressure to meet US trade and security standards, resulting in new tariffs on Chinese inputs and stricter origin verification under the United States Mexico Canada Agreement (USMCA). The message is clear: access to the US market increasingly depends on political alignment and compliance with evolving security protocols.
China, facing slower domestic growth, is doubling down on two fronts: securing upstream inputs and exporting downstream industrial overcapacity. Chinese firms have deepened their presence in Latin American mining, agriculture and logistics. One-third of Brazil’s soybeans and iron ore now flow to China, often under yuan-denominated contracts. On the export side, Chinese packaging and automotive goods, for example, are entering Latin America at highly competitive prices. In 2024-25, Chinese boxboard undercut local prices by over 30%, even after tariffs. Domestic mills in Mexico and Brazil have been forced to cut output. While this deflationary pressure benefits consumers, it challenges local producers and raises questions about the region’s long-term competitiveness.
Russia’s moves are more focused on critical inputs but remain equally strategic. Despite sanctions, Russian fertilizer exports to Brazil, mainly potash, continued to increase in 2025, consolidating Russia as an essential supplier to Latin American agriculture, with Brazil playing a central, leading sectoral role. Any disruption or friction in trade, such as secondary sanctions, could severely impact soybean and corn production.
Brazil and Mexico have announced plans to reduce their dependence on fertilizer imports. In Brazil, more than 70% of all fertilizer demand is supplied by imports due to the country’s limited (and high-cost) domestic production capacity and natural reserves. However, progress has been slow and is likely to remain minimal in the short term, as we enter an era in which capital costs are high and often prohibitive for greenfield projects, especially in segments where the private sector is unlikely to compete with imports from the US, China or Russia. Meanwhile, Latin American governments lack sufficient domestic private-sector support to increase public spending and fund these projects on their own, leaving them at a crossroads between national security and economic dependence.
These supply chain shifts are reshaping the economics of commodity markets. In energy and metals, security of supply now outweighs cost. Europe’s pivot away from Russian gas has created new demand for Latin American liquefied natural gas (LNG). Chile and Argentina are fielding competing offers for lithium and copper from Chinese- and US-backed investors, often with conditions tied to processing, ESG compliance and end-use guarantees.
Agribusiness is equally exposed. Trade wars, sanctions and currency volatility have made flexibility a premium. Firms with diversified sourcing and treasury capabilities, i.e., able to settle in yuan or rubles and hedge across markets, are better positioned to manage shocks. Brazil’s soy, iron ore and pulp exporters are already navigating this terrain, using swap lines and multi-currency contracts to maintain liquidity and access.
Nearshoring and friendshoring are expanding Latin America’s role in global manufacturing, but there are challenges. US regulators are demanding cleaner, traceable supply chains. A Mexican auto part might need to prove it contains no Russian aluminum or Chinese electronics. This is leading to redesigns of sourcing strategies and could boost intra-regional trade in commodities like bauxite, rubber and pulp. The region’s ability to seize these opportunities depends on strong institutions. Chile, with stable policies and open trade, continues to attract mining investments. Bolivia, despite its lithium reserves, faces investor hesitation due to political instability, while Peru is in the middle. Transaction costs, such as licensing delays, legal uncertainty and regulatory opacity, are becoming as important as geology or yield, but they are often difficult to measure or model.
Venezuela remains geopolitically relevant for its oil and mineral reserves but also poses regional risks. Escalation through military action, tensions or invasion could disrupt energy supplies, logistics and diplomacy. Sanctions, licensing and diplomatic changes can quickly affect trade, prices and investments. Due to institutional volatility, investors need flexible contracts with force majeure, exit and renegotiation clauses, supported by ongoing monitoring of political and regulatory risks.
Data sovereignty and regulation of AI, cybersecurity and digital infrastructure add complexity. Fragmented rules and data localization can hinder regional digital integration and create uneven compliance. AI productivity benefits depend on transparent governance, regulatory interoperability and workforce upskilling, which reduce the costs of meeting security standards.
Regional integration evolves amid institutional asymmetries and legal uncertainty. Mercosur, the Pacific Alliance and other bilateral agreements develop, alongside reviews of trade arrangements, disputes and rules of origin that alter routes and partners. State coordination, licensing, public consultations and dispute resolution will be crucial for reducing friction and providing certainty to capital-intensive projects.
But do not be fooled into thinking that Latin America is just reacting to external pressures. It is also actively reshaping its own regional value chains. Brazil, for instance, has deepened its economic ties with neighbors through targeted nearshoring strategies. In Paraguay, Brazilian manufacturers have expanded operations in maquila zones to take advantage of lower labor costs and tax incentives, particularly in textiles, auto parts and plastics. In Uruguay, Brazilian capital has flowed into logistics, agribusiness and financial services, taking advantage of regulatory stability and geographic proximity. These moves reflect a broader trend of intra-regional integration, where Latin American firms are not merely passive participants in global realignments, but are also playing their own strategic game on the regional chessboard. This internal reorganization adds a layer of resilience and optionality to supply chains, especially as firms seek to diversify exposure and reduce dependence on distant and/ or politically volatile partners.
This year, we foresee Latin America being shaped by geopolitical, economic and technological forces, making it both relevant and vulnerable. The link between security, trade and tech policy, major power rivalry, and energy instability demands coordinated approaches focused on supply chain resilience, regulation and capacity. For commodity stakeholders, geopolitical risk is a key factor influencing markets, alongside fundamentals. Global value chains are restructuring but not disappearing, with countries trading within their comfort zones and Latin America trying to maintain ties across the board. Its resource base, location and trade links give it leverage, but only if used strategically. The region’s challenge is to stay in the game by building flexibility, remaining neutral geopolitically without compromising its long-term growth by simply agreeing to sell raw materials, and aligning with global value chain trends.
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