Power shifts energize Latin America’s real estate market

Latin America is going through its most intense cycle of political transitions in a decade. In recent years, virtually every market relevant to institutional real estate investment — Mexico, Brazil, Colombia, Peru, Chile, Argentina, Ecuador and Bolivia — has inaugurated or renewed administrations with divergent economic orientations.

For developers, real estate funds and local operators, the central question is less about political volatility itself and more about how it is reflected in real asset prices, and which destinations in the region turn institutional stability into a return premium.

As will be seen below, markets with a proven ability to implement credible fiscal policies, maintain contractual legal certainty and preserve FX liquidity are rewarded with larger inflows and a lower cost of capital. The rest face rising risk premiums that make financing more expensive and reduce liquidity.

The opening panel of Latin America GRI Real Estate, in Miami, will present the views of major investment managers on changes of government in Latin America, opportunities, risks and asset valuation. Learn more.

Argentina’s radical shift

As one of the first countries in this cycle to renew its leadership, Argentina elected Javier Milei in November 2023, and he took office the following month.

The full repeal of the Rental Law through Decree of Necessity and Urgency (DNU) 70/2023 restored freedom of contract, with free choice of currency and indexation. The result was an increase of more than 170% in residential rental supply in Buenos Aires, a real decline in prices and an injection of liquidity from the tax amnesty (capital repatriation) program, pushing values per square meter from a range of US$1,800–2,000 to levels above US$2,500, according to Zonaprop.

The prevailing strategy is contractual dollarization, under which both the sale price and the rent are set and paid in US dollars. Argentine investors are also seeking direct exposure to the US real estate market through vehicles that provide access to established dollar-denominated operations, eliminating local currency risk at its root.

In Mexico, contractual dollarization also serves as a hedge against currency depreciation, while El Salvador has fully adopted the dollar as legal tender.

Back in Argentina, year-over-year inflation fell from 211% in 2023 — the country’s highest level this century — to a cumulative 31.5% in 2025. As a result, the benchmark interest rate dropped from 133% a year to the current 29%.

This correction was made possible by a set of aggressive fiscal austerity and monetary discipline measures, including ending money printing to finance public spending, cutting state subsidies on energy, water, gas and transportation rates, dissolving government agencies, laying off public employees and freezing discretionary transfers to the provinces.

On the trade front, the federal government dismantled tariff barriers and eased the entry of imported goods. Greater competition forced domestic industry and retail to hold or cut prices to remain competitive.

The dividend of political alternation

Colombia offers the clearest evidence of how a pro-market change of government can unlock pent-up capital. After years of uncertainty under the previous administration — which led to credit rating downgrades by S&P and Moody’s in 2025 — the election of Abelardo de la Espriella acted as a catalyst for confidence.

One public statement illustrates this phenomenon: construction supplies provider Madecentro announced investments of US$4 million to expand its operations. Its founder, Dimas Tobón, said explicitly: “All investments are on standby and will be activated by the change of government.”

Despite this optimism, Colombia’s real estate sector faces concrete headwinds. Residential mortgage rates climbed 200 basis points year-to-date through July 2026, reaching 14% compared with a historical average of 10%. The collapse of the Mi Casa Ya program in December 2024 shrank housing investment from 5% to 2.9% of GDP, redirecting capital flows toward dollar-denominated office and logistics assets.

Office cap rates remain around 8.5% and discount rates hover near 12.5%, compared with a 10-year sovereign bond yielding 11.8% — a spread compression indicating that valuations have not yet fully priced in the new cost of capital, according to an analysis by El Dorado Capital Advisors.

In Peru, recurring political instability (reflected in a succession of nine presidents over the past decade) has not prevented resilience in corporate credit profiles or progress on strategic projects such as Lima Metro Line 2 and the Chancay megaport.

BNamericas found that, despite the political noise, “companies managed to preserve their credit profiles” and “very significant M&A transactions” were completed between late 2025 and early 2026. President Keiko Fujimori’s program places private investment at the center of growth, offering legal stability, streamlined procedures and tax incentives for businesses.

The impact of the electoral process on the residential segment was concentrated in the high-income bracket. In Lima, the average value per square meter stood at S/6,886 in April. However, 10% to 15% of buyers in the A and B segments postponed purchasing decisions during the election period, mainly in districts such as Miraflores, San Isidro and Surco. This pent-up demand could materialize as political uncertainty clears.

Another relevant case is Costa Rica, where center-right candidate Laura Fernández was elected president in February. The Central American nation continues to consolidate its position as a preferred destination for advanced manufacturing under its free trade zone regime, with specific incentives for medical devices and high technology.

Although Mexico is the epicenter of nearshoring, the strategic alignment between Fernández and President Donald Trump points to a favorable environment for accelerating the sector’s development in Costa Rica.

Greater caution in Brazil and Mexico

Luiz Inácio Lula da Silva’s narrow reelection in Brazil opens up the most complex scenario in the region for the real estate business. Gross public debt has reached R$11.1 trillion, equivalent to 82.9% of GDP, while the government projects economic growth of just 2.3% for 2027.

Confirmation of the election result weighed on equities and pushed the dollar up to R$5.35. For now, uncertainty persists over the stance the Central Bank will take on the benchmark interest rate (Selic), currently at 13.75% a year, against an inflation forecast of 4.99%.

In a report released after election day, UBS set out three conditions for investors to rebuild their exposure to Brazilian assets: a concrete, quantified fiscal adjustment package; reconciling campaign promises estimated at more than R$300 billion with budget discipline; and a viable path to legislative approval in a conservative-majority Congress before year-end.

If these signals fail to materialize, the bank expects the stock market, the exchange rate and sovereign debt yields to return to levels seen before the first round of voting, with a risk of further deterioration in the short term.

J.P. Morgan, for its part, stresses that the first strategic guidelines will be defined by the appointment of the finance minister and the shape of the 2027 Budget, which requires congressional approval before the end of the year. In addition, the February elections for the leadership of the Chamber of Deputies and the Senate will gauge the Executive’s ability to govern in Congress.

In Mexico, ideological differences between President Claudia Sheinbaum and US President Donald Trump led to Washington’s formal demand for annual reviews of the USMCA trade agreement (known as T-MEC in Mexico), raising red flags in the industrial real estate sector.

At the same time, the constitutional reform providing for the popular election of judges and magistrates has increased counterparty risk and contractual uncertainty. To avoid the jurisdiction of local courts and neutralize the risk of a politicized judiciary, institutional capital has begun to require independent international arbitration clauses (seated in venues such as New York or Paris under ICC/ICSID rules).

In Chile, the risk stemming from the 2020–2023 constitutional processes, with initiatives that contemplated structural reforms to the property regime, accelerated the flight of institutional capital and large family offices to South Florida and the Iberian Peninsula. The domestic market regained traction after voters rejected the drafts at the ballot box in 2022 and 2023. Since March, the presidency has been held by José Antonio Kast.

Strategic implications

An analysis of recent election cycles shows the need to separate political rhetoric from monetary discipline. Cases such as Peru show that instability in the executive branch does not paralyze real estate development as long as the monetary authority preserves its independence and space absorption fundamentals remain solid.

Second, institutional certainty is priced in; it does not respond to mere market wishes. Economies that ensure rigorous fiscal execution — such as Argentina’s surplus or the expectations of pro-market opening in Chile — attract capital flows and drive credit spread compression. Conversely, markets with fiscal inconsistency (such as Brazil at the current juncture) are forced to pay rising premiums to secure financing.

Whatever the circumstances, contract design is the first line of defense against political risk. Currency bands, automatic renegotiation mechanisms and hard-currency contracts are far more decisive tools than trying to predict election outcomes.

Rigorously adjusting discount rates and structuring robust legal safeguards make it possible to turn political transitions in Latin America into catalysts for value creation and portfolio expansion. A long-term investment perspective is emerging as the most effective strategy for navigating the region’s political volatility.