{"text":[[{"start":7.6,"text":"The writer is chief executive of a geopolitical risk advisory firm and a former foreign minister of Panama"}],[{"start":14.35,"text":"In December 1994, Mexico’s peso collapsed and took Latin America with it. The mechanism was simple: governments had borrowed in dollars they could not print, and when the currency cracked, the debt became unpayable overnight. "}],[{"start":29.299999999999997,"text":"Economists called it “original sin”: the inability to borrow in their own currency. For three decades, it defined Latin American bonds as a trade you got out of, not into. Then the Strait of Hormuz effectively closed with the Iran war. And the region’s bonds mostly did not flinch."}],[{"start":46.5,"text":"When the world goes looking for shelter during an oil war, the destinations are predictable: the dollar, gold, short-term Treasuries. Nobody puts Latin American sovereign bonds on that list. "}],[{"start":58.25,"text":"Yet as the dollar surged in March, the region’s average sovereign spread didn’t move. There was no contagion. The reason is structural, not lucky: as net commodity exporters borrowing in their own currencies, these governments earned more dollars from the crisis than they owed. This reflects, too, the shift in borrowing profile. Brazil issues 96 per cent of its sovereign debt in reals, for example. Mexico, more than 80 per cent in pesos. "}],[{"start":86.1,"text":"And in the first quarter, with the Iran war already under way, Brazilian local bonds returned 7.3 per cent in dollar terms. Colombia, 4.2. Even Mexico, the regional laggard, eked out 0.3. All three carry the same “emerging market” label as Thailand, which fell 7.2 per cent, and India, which lost 5.9. Between the Brazilian and Thai bonds, there was a difference of nearly 15 percentage points in performance."}],[{"start":114.19999999999999,"text":"The first explanation for the disparities is geography. Asia takes 84 per cent of the crude that flows through Hormuz; Latin America takes virtually none. When the strait closed, Asian economies absorbed the damage directly: fuel shortages, reserve drawdowns, currency pressure. Latin America, by contrast, absorbed demand. "}],[{"start":135.85,"text":"Brazil hit record oil output of 4.1mn barrels per day, much of it shipped to China. Argentina doubled its LPG exports to India. Guyana, producing 10 times what it pumped five years ago, is becoming an important producer when supply tightens elsewhere. The commodity windfall explains the upside. It does not explain why sovereign spreads stayed flat through the worst energy shock in half a century."}],[{"start":null,"text":"
"}],[{"start":162.7,"text":"Every oil shock in modern history has broken Latin American bonds — 1973, 1979, 1990, 2008. The sequence was always the same: a crisis drove the dollar up, commodity revenues collapsed and governments that had borrowed in dollars they could not print were left holding the bill. That was the original sin. And now it is mostly gone. "}],[{"start":184.7,"text":"Latin America’s sceptics will argue that the commodity windfall is only cyclical. If energy prices normalise, the windfall fades. And the deeper vulnerability remains: politics. "}],[{"start":195.89999999999998,"text":"Instability is not a tail risk in the region. It is a recurring feature. The very mechanism that now insulates these economies from dollar shocks only works if governments remain credible. That is never guaranteed. But, at this moment, they are managing to project that credibility. Javier Milei has brought Argentine inflation from over 200 per cent to around 30 per cent since coming to power at the end of 2023. After being inaugurated last month as president of Chile, José Antonio Kast cut ministry budgets across the board within weeks of taking office. "}],[{"start":232.2,"text":"It is a similar story in other countries. Costa Rica has introduced a ceiling on spending growth depending on debt to GDP. And the Dominican Republic now has a formal cap that restricts spending growth to no more than 3 percentage points above the annual inflation rate. "}],[{"start":248.1,"text":"Energy cost pressures arising from the Iran war will test the resolve of these countries and their discipline, particularly if the conflict is extended. But the region’s improvements are getting harder to dismiss."}],[{"start":260.55,"text":"Sovereign debt is only the most visible signal. In a basket of 20 emerging market currencies, the Brazilian real is the best-performing this year. The Argentine peso, once the poster child of emerging markets fragility, rallied against the dollar while the Iran war raged. "}],[{"start":277.65000000000003,"text":"Geopolitical shifts are making it harder to treat all emerging markets as one trade. Most portfolios still do. Latin America exports commodities through Atlantic routes, borrows increasingly in its own currencies, and trades with both Washington and Beijing. In 1994, currency was the region’s vulnerability. In 2026, it has become its shield. The original sin was real. The assumption that it still applies is what’s outdated."}],[{"start":314.15000000000003,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777357617_5321.mp3"}