By Gustavo Ferraro, Head of Capital Solutions
Emerging markets are navigating a turbulent landscape shaped by recent U.S. tariff adjustments, ongoing trade negotiations, and broader geopolitical shifts. These factors have introduced uncertainty, affecting trade flows and investor sentiment. Higher tariffs on key U.S. trading partners like China, Canada, and Mexico have led to currency fluctuations and inflationary pressures globally and across emerging market economies.
Yet this upheaval has created an opportunity for U.S. asset management firms in emerging markets. Year to date, emerging market corporate issuances have surged by 22% compared to the same period in 2024, driven by increased demand from regional players seeking to reduce exposure to local debt. They are now shifting to prioritize U.S. dollar lending through public markets, private credit, and structured finance. This trend underscores firms’ ability to deploy dollar-based and currency-hedged transactions. Identifying high-quality borrowers with no U.S. export exposure further mitigates broader risk.
So far, Latin America is emerging as a clear winner amid the turmoil. There is no certainty on where the Trump administration wants to take the negotiations, but there appear to be two views within the administration: a) the Navarro camp, which wants to use tariffs to redomicile basic manufacturing back to the U.S. as a lever to generate employment, and b) the Bessent camp, which still defends international trade and the concept of a global supply chain, but one with fairer treatment for the U.S. However, Latin American countries are being imposed a minimum additional tariff of 10%, and apart from Mexico, they do not have export surpluses with the U.S.
In Mexico, President Claudia Sheinbaum has taken a constructive stance on U.S. relations by addressing migration and drug trade concerns while reducing imports from China. This is likely to lead to a favorable review of the USMCA in the second half of 2025, with largely unchanged terms but stricter “rules of origin” regarding North American components. Given Mexico’s deep economic integration with the U.S., its lower industrial wages, and competitive real estate costs, nearshoring remains a key financing opportunity. Additionally, infrastructure investment, SME financing, and middle-market real estate continue to attract strong sponsor interest, reinforcing Mexico’s evolving role in global trade realignment.
Across Latin America, including in Brazil, thoughtful asset selection and strategic positioning are unlocking value in sectors that offer stable returns despite macroeconomic headwinds. Diversified asset-backed portfolios, industries tied to lower-volatility commodities, and well-managed real assets serve as natural hedges against inflation and broader market uncertainty, creating opportunities for attractive risk-adjusted returns.
Türkiye is another country that is expected to experience limited impact from tariffs. Disciplined monetary policies and high local interest rates create attractive conditions for USD-denominated private credit. Companies with strong U.S. dollar revenue streams and manageable leverage are well-positioned to optimize their capital structures, enhancing credit quality and investment appeal. High interest rates pose challenges for local borrowers but offer compelling yields for investors seeking exposure to Turkish assets.
In conclusion, the evolving landscape of U.S. tariffs presents both challenges and opportunities for emerging markets. By strategically navigating these dynamics, there is a compelling case for unlocking significant value and achieving attractive risk-adjusted returns despite the uncertainties.
May 1, 2025
About Gramercy
Gramercy is a global emerging markets alternatives investment manager with offices in West Palm Beach (Florida), Greenwich (Connecticut), London (England), Buenos Aires (Argentina), Miami (Florida), and Mexico City (Mexico) and dedicated lending platforms in Mexico, Türkiye, Peru, Pan-Africa, Brazil, and Colombia. The $6 billion firm, founded in 1998, seeks to provide investors with a better approach to emerging markets, delivering attractive risk-adjusted returns supported by a transparent and robust institutional platform. Gramercy offers alternative and long-only strategies across emerging markets asset classes, including multi-asset, private credit, public credit, and special situations. Gramercy’s mission is to positively impact the well-being of our clients, portfolio investments, and team members. Gramercy is a Registered Investment Adviser with the US Securities and Exchange Commission (SEC) and a Signatory of the Principles for Responsible Investment (PRI). Gramercy Ltd, an affiliate, is registered with the UK Financial Conduct Authority (FCA).
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