By Niket Nishant and Pranav Kashyap
Latin American assets slipped on Tuesday, resuming their fall on renewed jitters over U.S.-China trade tensions, while Argentine stocks suddenly fell after the U.S. president's comments.
Buenos Aires stocks BCBA:IMV, which had been on a steady climb, abruptly reversed course - sliding over 2% - after Donald Trump made clear that Washington's financial lifeline to Argentina is contingent on President Javier Milei's party winning this month's midterm elections, bluntly warning, "We're not going to waste our time" if they don't.
The stakes for Milei have now dramatically risen. His September defeat in Buenos Aires Province had already triggered a sharp selloff in Argentine assets, and Trump's warning has added fresh urgency to Milei's uphill battle to retain investor confidence.
Investors who were tiptoeing back into Argentina, took a pause to digest Trump's message, with U.S.-listings of the country's stocks tanking.
"The symbolism may quickly fade into resentment and that's going to be bad for Milei. The stakes are extremely high and he has to deliver over the next few days in order to get the voters next to him to retain investor confidence," said Pantheon Macroeconomics' chief Latin America economist Andres Abadia.
The two counterparts met in the White House, where Trump said Milei was "on the verge of economic success" and offering an endorsement ahead of the midterms. Treasury Secretary Scott Bessent echoed the sentiment, saying Milei is poised to "do well" as voters weigh his radical reform agenda amid a $20 billion U.S. bailout.
Bonds, however, kept their strength. Argentina's 2029 dollar-denominated bond (040114HX1=1M) was up 2.6 cents at 79.75 cents on the dollar, while bonds maturing between 2030 and 2046 were up 1 cent or more each.
Sentiment globally was somber due to the latest flare-up between Washington and Beijing on a dispute over rare earths. Signals from both sides remain mixed as they began imposing additional port fees on ocean shipping firms on Tuesday.
MSCI's gauge for Latin American equities (.MILA00000PUS) lost 0.1%, while a parallel index tracking regional currencies (.MILA00000CUS) was down 0.2%. Both indexes were trading close to one-month lows after a surge on Monday.
Tuesday's declines highlight how sensitive investors remain to the slightest signs of trade friction, which can dent sentiment in export-driven economies in Latin America.
The weakness eclipsed a brighter forecast from the International Monetary Fund, which raised its growth estimate for Latin America and the Caribbean, pointing to more benign U.S. tariff rates.
Mexican stocks BMV:ME fell 0.3%, while the peso FX_IDC:USDMXN depreciated 0.2%. IMF said the second-largest economy in Latin America is expected to expand 1% this year, higher than the 0.2% estimate in July.
Peru's stocks (.MXNUAMPESCPGPE) fell 0.7%. The country is a major exporter of copper, which fell on Tuesday.
The Brazilian real FX_IDC:USDBRL and the Bovespa BMFBOVESPA:IBOV index were flat as investors digested Brazil's government discussing measures to offset Congress' shelving of a proposal that would have overhauled taxation on investments while also raising taxes on betting and fintech companies to boost revenue.
Elsewhere, Ethiopia's international bond (XS1151974877=TE) fell 1.5 cents on the dollar to a two-week low after restructuring talks with bondholders concluded without a deal.
Key Latin American stock indexes and currencies:
Equities
Latest
Daily % change
MSCI Emerging Markets CBOE:EFS
1340.98
-0.91
MSCI LatAm (.MILA00000PUS)
2444.47
-0.11
Brazil Bovespa BMFBOVESPA:IBOV
141816.32
0.02
Mexico IPC BMV:ME
60837.21
-0.34
Argentina Merval BCBA:IMV
1879133.72
-2.379
Chile IPSA BCS:SP_IPSA
9013.31
2.48
Colombia COLCAP BVC:ICAP
1900.62
1.65
Currencies
Latest
Daily % change
Brazil real FX_IDC:USDBRL
5.4658
-0.04
Mexico peso FX_IDC:USDMXN
18.4965
-0.17
Chile peso FX_IDC:USDCLP
960.71
-0.35
Colombia peso FX_IDC:USDCOP
3920
0.04
Peru sol FX_IDC:USDPEN
3.4198
0.12
Argentina peso (interbank) FX_IDC:USDARS
1355
-0.37
Argentina peso (parallel) (ARSB=)
1400
0.36