From the LATAM Discount to Fair Value
Showing the figures as the report published them, September 2025.
The "LATAM Discount" refers to the phenomenon where startups and companies in Latin America are often valued lower than counterparts in the United States, Europe or other emerging markets, despite similar or even superior metrics. The discount is attributed to perceived risks, political instability, economic volatility, and regulatory challenges, that deter international investors.
Even in traditional equities markets, Latin American equities have traded at a significant discount to global averages and Emerging Markets in recent years. The MSCI LATAM Index, which captures large- and mid-cap representation in Brazil, Chile, Colombia, Mexico, and Peru, suggests LATAM is trading at a –51% discount compared to the world, above the historical average of –13.9%. According to Itaú BBA, "this can be partially explained by the rising relevance of tech companies in global indexes, at a higher pace than EMs, while LATAM has virtually little exposure to this sector." Against other Emerging Markets, LATAM trades at a –27.7% discount as of 2024.
Latin American assets trade far below global and emerging-market peers, and well beyond the historical average. The report’s core claim: this is a solvable mispricing.
The figure as the report published it, September 2025. It has since been re-verified and moved; switch to Current to see it.
SourceItaú BBA Equity Strategy Team, Latam & Brazil Equity Strategy: Thematic Book
Methodology: REFRESHED. Price-to-book discount computed from the MSCI EM Latin America Index factsheet, 30 Jun 2026: LATAM P/BV 1.99 vs ACWI 3.86 = −48.4% (world); vs EM P/BV 2.58 = −22.9%. Narrowed from the Itaú BBA 2024 read (−51% / −27.7%) after LATAM rallied +55.67% in 2025 (ledger #77/#78). Still a market figure that moves daily, asOf is the factsheet date.
| Category | Value |
|---|---|
| historical average | −13.9% |
| vs. emerging markets | −27.7% |
| vs. the world | −51.0% |
# Key exposures that drive risk and return
The 2025 MSCI Index compares the factor exposures of LATAM and other EMs like China or India against a global benchmark (MSCI ACWI IMI). From the six main factors, Value, Low Size, Momentum, Quality, Yield and Low Volatility, LATAM is especially overexposed to Volatility, represented by commodity exposure, macroeconomic swings and political risks. This is typically negative and can deter global equities investors. In parallel, LATAM lags behind other emerging markets and the global benchmark on Quality and Momentum, indicating fewer high-quality balance sheets or fewer stocks with strong price momentum. A negative Low Size tilt suggests the index is more concentrated in large-cap stocks.
This phenomenon brings us to the pivotal question: why bother investing in emerging markets? After all, investors might remain in the U.S., where returns are stable and fixed-income rates exceed 5%. As one observer put it, "the big issue seems to be whether emerging returns are enough to drag U.S. and Western funds away from an increasingly comfortable home bias." Nevertheless, this report and broader data indicate compelling reasons to invest precisely at this juncture.
The LATAM discount represents a temporary mispricing driven by solvable structural factors, regulatory uncertainty, limited market liquidity, and information asymmetries, rather than permanently inferior fundamentals.
As these factors improve through institutional development, enhanced transparency, and deeper capital markets, the region’s valuations should converge toward their intrinsic value, creating attractive risk-adjusted returns without requiring speculative premiums.
The question is shifting from "Why Latin America?" to "Why haven’t we invested more?"
Cristián Hernández Manager, Zentynel