Latin America Morning Pulse Monday, February 3, 2026

The Big Picture

Risk Dashboard

Brazil

What Happened

• Campaign Strategy Shift: President Lula is reportedly weighing an “anti-establishment” pivot for his 2026 re-election campaign, shifting focus toward financial elites rather than his traditional “rebuilding Brazil” narrative. The move mirrors rhetorical tactics previously associated with Jair Bolsonaro.
• Market Performance: The Ibovespa rose 0.5% to trade above 182,000 points, positioning for a busy earnings week. XP Investimentos raised its year-end target to 190,000 following a January rally of 12.6% in reais (17.4% in USD terms)—among the world’s strongest starts to 2026.
• Manufacturing Contraction: January’s PMI fell to 47.0 from 47.6, marking the weakest industrial conditions in four months.

Why It Matters

The campaign signal suggests Lula‘s team sees populist framing as essential to defending against a resurgent right. For investors, this introduces policy uncertainty heading into October.

However, near-term market dynamics remain supportive: a weaker dollar, commodity strength, and institutional-quality positioning have made Brazil a beneficiary of global asset rotation away from the U.S.

Risk Level: Watchful

Mexico

What Happened

• Cuba Humanitarian Standoff: President Claudia Sheinbaum announced plans to send food and essential supplies to Cuba via the Mexican Navy, but held off on oil shipments after Trump’s executive order threatened tariffs on countries supplying fuel to Havana. “We are searching all diplomatic channels,” Sheinbaum said from Sonora.
• Senate Leadership Shake-Up: Adán Augusto López stepped down as Morena’s Senate coordinator. Sheinbaum distanced herself from the departure, saying it was “his own decision.” An arrest warrant for López’s former security chief—accused of leading a local drug gang during López’s governorship in Tabasco—had dogged his leadership.
• Cartel Transfer Controversy: Families of accused cartel members claim Mexico violated due process by sending 92 suspects to the U.S. without formal extradition orders since February 2025. The transfers are widely seen as concessions to Washington.

Why It Matters

Mexico is navigating the most delicate phase of its U.S. relationship in decades. Sheinbaum continues walking a tightrope between domestic sovereignty messaging and practical accommodation of Trump administration demands.

The Cuba decision crystallizes the dilemma: humanitarian instincts collide with tariff threats, and oil shipments—less than 1% of Pemex production—become a symbolic flashpoint.

Risk Level: Elevated

Argentina

What Happened

• INDEC Leadership Crisis: Marco Lavagna resigned as head of Argentina’s national statistics agency Monday morning. Economy Minister Luis Caputo later revealed Lavagna wanted to implement a new inflation methodology immediately; the Milei administration preferred to wait until disinflation “was totally consolidated.” Pedro Lines, a deputy at the agency, assumes the director role.
• Methodology Postponed: The inflation overhaul—expected to show services prices running higher—has been shelved. Caputo said monthly inflation is expected around 2.5% when January data releases next week.
• Market Access Strategy: Caputo reiterated that Argentina has “no plans” to issue bonds in international markets to cover upcoming maturities. Officials prefer internal financing and asset sales, even as country-risk spreads hit seven-year lows.

Why It Matters

The INDEC episode exposes the political sensitivity of inflation statistics in a country where price credibility is the government’s primary achievement.

Milei’s team fears that changing methodology mid-disinflation would invite accusations of manipulation—the same charge that haunted the Cristina Fernández de Kirchner era.

For markets, the government’s reluctance to issue abroad despite favorable conditions signals fiscal discipline but also raises questions about refinancing flexibility with $4.5 billion due in July.

Risk Level: Watchful

Colombia

What Happened

• Petro Arrives in Washington: President Gustavo Petro landed in the U.S. late Sunday ahead of Tuesday’s White House meeting with Donald Trump—their first face-to-face encounter. The Colombian delegation includes senior officials from security, trade, and foreign policy.
• High-Stakes Diplomacy: Colombia hired DGA Group, a U.S. lobbying firm, to facilitate the meeting at an estimated cost of 2 billion pesos (~$715,000). The relationship has been among the most volatile in the hemisphere: Trump called Petro a “drug lord,” while Petro called Trump an “accomplice to genocide.”
• Deportation Flights Resume: The Colombian Foreign Ministry announced that U.S. deportation flights have officially resumed—a significant thaw after Petro’s January 2025 refusal to accept military flights sparked tariff threats and sanctions.

Why It Matters

The Petro-Trump summit could either stabilize a dangerously frayed alliance or produce a Zelenskyy-style confrontation. The two governments fundamentally disagree on counter-narcotics strategy: Washington wants aerial eradication; Bogotá prefers interdiction and alternative development.

Yet both sides have incentives to cooperate on Venezuela and transnational crime. Petro leaves office in August—this may be his last chance to reset the relationship.

Risk Level: Elevated

Chile

What Happened

• Bachelet Candidacy Formalized: President Gabriel Boric officially registered Michelle Bachelet’s candidacy for UN Secretary-General at La Moneda Palace. The nomination is jointly backed by Mexico and Brazil—the region’s largest economies.
• Regional Coordination: President Lula wrote on X that “after eight decades of history, it is time for the organization to finally be led by a woman.” The Latin America and Caribbean bloc argues it is next in line for the rotating leadership position as António Guterres’s term ends.
• Kast Remains Silent: President-elect José Antonio Kast, who takes office next month, declined to endorse or oppose Bachelet’s bid. “This is not resolved today or tomorrow,” he said from Viña del Mar. Some figures in his coalition have criticized the candidacy as representing a “worn-out political cycle.”

Why It Matters

Boric is racing to lock in the nomination before Kast assumes power. Bachelet’s history—she criticized Trump’s immigration policies during her tenure as UN High Commissioner for Human Rights—could complicate her candidacy with Washington.

But Latin America’s coordinated push signals serious intent, and Bachelet brings unmatched regional credentials: twice Chile’s president, former UN Women chief, and experienced in multilateral diplomacy. The race also features Argentina’s Rafael Grossi (backed by Milei) and Costa Rica’s Rebeca Grynspan.

Risk Level: Watchful

Peru

What Happened

• Papal Invitation Extended: Peru’s ambassador to the Vatican, Jorge Ponce San Román, publicly invited Pope Leo XIV to visit during a ceremony in the Vatican Gardens. The pontiff—who holds Peruvian citizenship after two decades as an Augustinian missionary—responded warmly, calling Peru “a country so dear to me.”
• Surprise Lunch Appearance: In a break with protocol, Pope Leo stayed for a buffet lunch organized by the Peruvian embassy, spending an hour with the country’s bishops in “a joyful, relaxed vibe.” The Vatican has confirmed Africa travel post-Easter; a Latin America trip (Argentina, Uruguay, Peru) is planned for 2026 or 2027.
• Bishops’ Ad Limina Visit: Peruvian bishops presented the Pope with a Marian mosaic and a statue of St. Rose of Lima, both created by young Peruvian artists.

Why It Matters

A papal visit would be a rare unifying moment for Peru’s fractured political landscape. Pope Leo’s personal connection to the country—he spent over a decade there and was bishop of Chiclayo—means this is more than ceremonial diplomacy.

For the current government, it offers legitimacy and positive international attention during a period of institutional stress.

Risk Level: Stable

Costa Rica — Election Special

What Happened

• Fernández Wins First-Round Landslide: Laura Fernández of the Sovereign People’s Party (PPSO) captured 48.9% of the vote—well above the 40% threshold—eliminating the need for an April runoff. Her closest rival, Álvaro Ramos of the National Liberation Party, conceded five hours into the count with 33.2%.
• Legislative Majority Secured: The PPSO won 31 of 57 seats in the Legislative Assembly—enough to pass most laws but short of the supermajority needed for constitutional reforms or Supreme Court appointments.
• Turnout Rebounds: Voter participation rose to 69.1%, up 9.1 percentage points from 2022’s first round.

Why It Matters

Costa Rica has pivoted decisively toward tough-on-crime conservatism. Fernández, 39, campaigned on completing outgoing President Rodrigo Chaves’s mega-prison (modeled on El Salvador’s Bukele-style facility), implementing mandatory prison labor, and stricter sentencing.

Security was voters’ top concern after homicides hit record levels in 2023. The result marks the most consequential Costa Rican election of the 21st century—and signals that the “Switzerland of Central America” may be following the Bukele playbook.

Risk Level: Transition Period

Regional Snapshot

Ecuador, Bolivia & Central America

Ecuador: The state of emergency declared after New Year’s Eve violence in Manta continues. The country closed 2025 with approximately 9,000 homicides nationwide. President Daniel Noboa’s security-first approach remains under pressure.

Bolivia: Vice President David Choquehuanca continues managing fiscal stabilization efforts. January showed a surplus, though structural challenges persist.

Central America: Regional leaders congratulated Costa Rica’s Fernández. The election outcome reinforces the security-first political shift sweeping the isthmus from El Salvador to Panama.

Markets at a Glance

The Week Ahead

Latin America Morning Pulse is designed for investors, institutions, and global decision-makers tracking the region’s political economy.