BofA Cools on Brazil and Shifts Bets to Chile and Colombia

Brazil · Markets

Key Facts

—The shift. Bank of America has reduced its positioning on Brazil and raised exposure to Chile and Colombia in its regional strategy.

—The trigger. BofA now sees Brazil’s benchmark Selic rate at 14.25% by the end of 2026, implying just one more cut in June and then a long pause.

—A reversal. The move marks a turn from earlier this year, when the bank had named Brazil its top regional pick.

—Election risk. Analysts cited rising election-related volatility, with votes due in Brazil, Colombia and Peru.

—Market backdrop. The change came as regional markets lost momentum after a shift in US rate expectations and a stronger dollar.

—Not a full exit. Despite trimming, the bank did not abandon Brazil entirely in its allocation.

One of Wall Street’s biggest banks has changed its mind about where the smart money should sit in Latin America, cooling on the region’s largest market and warming to two smaller ones.

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Bank of America has adjusted its strategy for Latin America, scaling back its bet on Brazil and lifting its exposure to Chile and Colombia. The change matters because BofA is one of the most closely watched voices guiding where global investors put money in the region.

The move is notable for its direction. Earlier in the year, the same bank had treated Brazil as its favourite market in Latin America.

For a reader sitting in London or Frankfurt, the takeaway is simple. A bank that had been telling clients to lean into Brazil is now quietly leaning the other way.

Why BofA cooled on Brazil

The reason sits in the cost of money. Brazil’s central bank sets a benchmark interest rate known as the Selic, and how fast it falls shapes the appeal of Brazilian stocks and bonds.

BofA’s economists now expect the Selic to sit at around fourteen and a quarter percent by the end of 2026. In plain terms, that points to just one more cut in June, followed by a long pause.

That is a worse outlook than markets had assumed only months earlier. High rates that stay high for longer make it more expensive for companies to borrow and dull the case for owning their shares.

Brazilian inflation has not helped. Annual price growth recently ran above the central bank’s target band, feeding doubts about how much room policymakers really have to keep cutting.

When the prospect of cheaper money fades, so does one of the main supports under a market. That is the support BofA judged to have weakened in Brazil.

What Chile and Colombia offer instead

The bank’s answer was to spread its chips differently rather than leave the table. It raised exposure to Chile and Colombia, two markets that have moved out of step with Brazil.

The timing fits a wider mood. Regional markets had lost momentum after investors revised their view of US interest rates and the dollar strengthened, a combination that tends to pull money out of emerging markets.

Politics is now part of the calculation too. The bank’s analysts pointed to rising election-related volatility, a real factor in a year that brings presidential votes in Brazil, Colombia and Peru.

It is worth keeping the shift in proportion. BofA trimmed its Brazil position rather than walking away from it, and a single bank’s reweighting is one view among many in a crowded market.

What the move says about Latin America in 2026

The rotation echoes a theme other big investors have been circling. Earlier in the year, rival strategists had also flagged the regional election calendar as a source of risk, warning that incumbents in several countries face unusually low approval and could give way to policy change.

It also reflects how quickly the mood can turn on a single number. Brazilian markets had drawn heavy foreign inflows on the bet that rates would fall steadily, and a tougher rate path unsettles that thesis.

Calls like this one rarely stay inside a single research desk. When a major bank rebalances, other investors take note, and the reasoning often travels faster than the trade.

The underlying message is about expectations, not certainty. BofA is betting that Brazil’s path to lower rates has become slower and bumpier than the market had priced.

None of this is a forecast that Brazil will underperform, and it is not investment advice. It is a read on relative value at a single moment, and those reads change as the data does.

For anyone tracking the region from abroad, the useful signal is the rotation itself. The story of 2026 in Latin America may be less about one big winner and more about money moving between markets as rate paths diverge.

Frequently Asked Questions

What did Bank of America change in its Latin America strategy?

The bank reduced its positioning on Brazil and raised its exposure to Chile and Colombia. It marks a shift from earlier in the year, when BofA had treated Brazil as its top market in the region.

Why did BofA become more cautious on Brazil?

Its economists now expect Brazil’s benchmark Selic rate to stay around fourteen and a quarter percent by the end of 2026, implying only one more cut and then a long pause. A slower path to cheaper money weakened a key support for Brazilian assets.

Should investors follow the call?

This is one bank’s read on relative value, not a forecast or investment advice. BofA trimmed rather than exited Brazil, and election-year volatility across the region adds real uncertainty for everyone.

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