Despite headlines of fiscal risks and political unrest, Colombia, Chile, and Peru are defying expectations with their appreciating currencies, credible policies, and strong economic fundamentals.
A recent exploration of Colombia, Chile, and Peru by our emerging market expert Lamine Bougueroua highlighted a compelling narrative that contrasts sharply with the negative headlines often associated with emerging markets. While media coverage has focused on fiscal risks, social unrest, and political uncertainty, these Andean nations are demonstrating resilience, supported by credible monetary policies, improving external accounts, and a favourable global backdrop.
Colombia: Fiscal Challenges, Currency Resilience
In Colombia, the fiscal situation remains challenging, with deficits projected to widen and public debt hovering at around 60% of GDP; fuel subsidies and a complex tax system have also added to the fiscal strain. However, the government has taken steps to manage these challenges, including shifting debt issuance into euros to reduce borrowing costs, and building liquidity buffers.
These efforts have bolstered investor confidence, with the Colombian peso appreciating by 20% since its 2022 lows, making it one of the strongest-performing emerging market currencies over the past 18 months. Despite political noise, Colombia’s currency is supported by high real yields, strategic debt management, and favourable valuations, offering a compelling opportunity for investors.
Chile: Copper Strength, Political Discount
Chile’s political landscape remains turbulent. However, the economic fundamentals tell a different story. Fixed investment is projected to grow by 5.5% this year, driven by mining and energy projects, while inflation has stabilised at around 4.0%.
The Chilean peso, however, is trading more weakly than its fundamentals suggest, reflecting political risks rather than economic weakness. The central bank’s ongoing effort to build an USD 18.5 billion foreign currency reserve has strengthened resilience, and once political uncertainty eases, the local currency has significant room to align with Chile’s strong copper prices and orthodox economic policies.
Peru: Stability and Gradual Gains
Peru stands out as a beacon of stability in the region. With inflation within its central bank’s 1–3% target range and public debt at just 36% of GDP, the country’s macroeconomic indicators are among the strongest in emerging markets. Growth is steady at around 3%, and domestic demand is recovering, supported by rising consumption and private investment.
The Peruvian sol reflects this stability, trading at 3.5–3.6 to the dollar and is expected to strengthen further. Despite risks such as populist bills in the country’s congress and rising crime, Peru’s credible institutions and disciplined policies provide a solid foundation for continued economic growth.
Andean Resilience: A Bright Spot in a World of Fiscal Uncertainty
The Andean region’s resilience is particularly striking when viewed against the backdrop of global fiscal instability. In developed markets, rising deficits, political gridlock, and record debt levels have weakened confidence in institutions. In contrast, Colombia, Chile, and Peru are improving their external accounts, maintaining credible monetary frameworks, and keeping debt levels manageable.
This journey through Bogotá, Santiago, and Lima underscores how headline risks can obscure underlying strengths. Colombia’s peso is appreciating, Chile’s investment flows remain robust despite political noise, and Peru’s sol is anchored by stability and credibility.
For investors, the message is clear: Colombia, Chile, and Peru offer some of the most attractive opportunities in emerging markets, with currencies that reflect their improving fundamentals and favourable global conditions.
The opinions expressed herein are correct as at 21 October 2025 and are subject to change without notice. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.
