Latin America has five emerging market economies as classified
by index provider MSCI. They are Brazil, Chile, Colombia, Mexico and Peru.

The largest by some distance is Brazil. In the MSCI Emerging Markets Latin America index the country has a weighting of more than 60%, Mexico is a distant second at a little over a quarter of the index.

As of 31 January 2022, and since inception on 31 December 1987, this index had outperformed the MSCI Emerging Markets index with an annualised return of 13.2% against 10.4% for the broader benchmark.

However, the sector breakdown shows the region is perhaps less innovative than other emerging markets with financial and natural resources businesses accounting for more than half of the index.

Information technology is just 0.5% whereas in the MSCI Emerging Markets index IT is the largest individual sector with a 21.8% weighting.

The average size of firms in the Latin American index is slightly larger than its broader counterpart at $6.14 billion against $5.42 billion.

Brazilian mining giant Vale is the only company in the Latin American index to make the top 10 constituents of MSCI Emerging Markets.

There is also at least one glaring omission in the list of Latin American emerging market countries, with the introduction of exchange controls seeing Argentina stripped of its existing status and assigned to a standalone category by MSCI in 2020.

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit here

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