This trip came at a pivotal moment for the region. Brazil is heading into the runoff of a deeply polarised election, Mexico is navigating an annual USMCA review and an increasingly assertive Washington, and both are contending with high real rates, fiscal pressure and one of the strongest El Niño events on record. Against that backdrop, what stood out was the resilience of the infrastructure operators: disciplined management teams executing on strong fundamentals and capital programs, under regulatory frameworks that remain intact whichever way the politics falls. The trip reinforced our conviction and highlighted how well positioned Latin America is for a world increasingly driven by energy, security and geopolitics.
This piece summarises the key messages from the trip and how they shape our positioning across the region.
Key takeaways
- Politics is the biggest catalyst, but infrastructure frameworks are safe whoever wins. Mexico is politically stable under a popular president, while in Brazil, Flávio Bolsonaro’s stronger-than-expected first round makes him the narrow favourite for the 25 October runoff. The fiscal path, not infrastructure policy, is the largest swing factor.
- The new ESG - Latin America owns the assets the new world needs. In a world now driven by energy, security and geopolitics, Mexico is the default nearshoring beneficiary and Brazil offers the trinity: clean power, critical minerals and food security.
- The macro backdrop is stable but constrained. Mexico’s growth is subdued and its rating sits one notch above junk; Brazil is slowing but resilient, with real rates of about 9% the key drag on valuations and a credible fiscal anchor the key catalyst.
- Mexican airports: near-term turbulence, structural growth intact. A cluster of largely cyclical headwinds has hit 2026 traffic, but development plans are on track and we believe the market has overreacted offering a buying opportunity.
- Brazilian transport: delivering. The toll road operators have delivered on most of last year’s calls, with growth now coming from amendments rather than aggressive auctions, and Rumo is pivoting from expansion to cash generation.
- Brazilian utilities: networks over generation. Distribution renewals are signed and RAB growth is accelerating, while wind and solar generation remains structurally broken. In water, Sabesp’s tariff overhang has been removed and Copasa adds a new platform.
- Capital discipline stands out. Management teams are benchmarking investment against share-price-implied returns, favouring amendments and secondary acquisitions, and walking away when the numbers don’t work.
Politics – the single biggest catalyst
Mexico – Sheinbaum, a steady ship
Mexico feels politically stable, with a popular president (68% approval ahead of her third year) and no credible opposition. Discontent on the ground was limited to the cost of living. Importantly, Morena’s allies have shown they can veto, stalling the flagship electoral reform, and the judicial overhaul has been partly scaled back. Given market concern about an unchecked supermajority, we see these checks as a positive. The next test is the June 2027 midterms.
The US relationship runs on “cooperation without subordination”: loud about sovereignty at home, accommodating in practice. The US declined to extend the USMCA at the July review, but the agreement remains fully in force, outstanding US demands have narrowed from 54 to 14, and an interim deal is targeted by year-end. Security rhetoric has escalated even as operational cooperation has deepened. The dependence is mutual but asymmetric: around 80% of Mexico’s exports go to the US (about a quarter of GDP), which gives Sheinbaum every incentive to keep confrontation within limits.
Infrastructure policy has changed more than the politics. The government has rebuilt the channels for private capital, and CFE’s first mixed-investment power tender drew nearly 38GW of bids for 7.4GW of capacity. Sovereign counterparty, institutional and execution risks remain, and much of the pipeline is unlisted, so listed exposure is still concentrated in airports and existing toll roads.
Brazil – a polarised and pivotal election
As expected, the 4 October first round produced a rematch in the 25 October runoff: President Lula, 80 and seeking a fourth term, against Senator Flávio Bolsonaro, standing in for his barred father. Polls had Lula leading by low single digits, but Flávio beat expectations, winning 47.0% of valid votes to Lula’s 45.2%, and right-wing parties gained ground in Congress. Brazilian assets rallied sharply following, with the real below R$5 to the dollar and the Ibovespa at a record. A first-round lead has never been reversed in a runoff, but the margin is narrow. “Polarising” was the word of the trip: with both candidates deeply rejected, the winner is likely to be the one fewer voters reject.
The sharpest contrast is fiscal. Lula offers gradual adjustment within the current framework, targeting a 1.3% of GDP primary surplus by 2030, but his own rhetoric undermines credibility. Flávio promises a front-loaded adjustment of about 1.5% of GDP in 18 months through a new debt-anchored rule, but his plan is thin on detail and at odds with his tax-cutting pledges. Neither closes the gap. Markets are already pricing a Flávio win; a Lula victory would likely trigger a sell-off.
Importantly, infrastructure is not contentious: neither candidate proposes reversing the concession frameworks. The difference is the pace of privatisation and, above all, the fiscal risk premium. São Paulo governor Tarcísio de Freitas, comfortably re-elected in the first round with almost 63% of the vote, remains the market’s preferred 2030 candidate should Flávio lose.
The new ESG – Energy, Security and Geopolitics
ESG’s soft power has been overtaken by a harder trinity. Grid resilience now beats green credentials, and sovereign and counterparty risk matter more than sustainability scores. Latin America didn’t drive this shift, but it is very well positioned for it. Mexico is the default landing pad for supply chains leaving China, provided its power, water and logistics infrastructure keeps pace; grid capacity in the north is already a bottleneck. Brazil offers the trinity in its purest form: a grid that is more than 85% renewable, the world’s second-largest rare earth reserves, energy self-sufficiency and a central role in global food security. In both, the best risk-adjusted exposure lies in regulated, availability-based infrastructure rather than commodities or merchant generation.
Economics – politics in the driver’s seat
- Mexico – stable but subdued. Growth is stuck around 1.5% and Banxico’s easing cycle is over at 6.50%. The Fed’s September hike has narrowed the rate gap to about 250–275bp, a fraction of its usual level, and company FX headwinds (from a strong peso) are easing. Fiscal is the real vulnerability: Moody’s and Fitch rate Mexico one notch above junk, and the 2027 budget relies on optimistic growth, rate and Pemex assumptions.
- Brazil – slowing but resilient. Growth is easing towards 1.5–1.9%, unemployment is at a record low of 5.4%, and the Copom has cut the Selic to 13.75%. But with inflation expectations above target, the real policy rate is still about 9%, and gross debt of 82.5% of GDP keeps a fiscal risk premium in the curve. The 2027 fiscal response, not growth, is the thing to watch.
- El Niño – winners and losers. One of the strongest events on record is building. Mexico faces water stress, but a quiet Atlantic hurricane season and Panama Canal restrictions offer offsets. In Brazil, drought threatens northern hydro and Amazon grain routes and adds to food inflation, but wind generation and availability-based transmission revenue provide natural hedges.
Infrastructure – strong conviction in the region
Mexican airports – structural growth intact, near-term turbulence
2026 traffic has been hit by an unusual combination of largely cyclical factors: Pratt & Whitney engine inspections, February’s cartel violence, Spirit Airlines’ collapse, US–Mexico aviation disputes, higher oil prices, a record sargassum season, a strong peso and the Trump overhang on tourism and VFR travel. H2 should be better than H1, and most of these factors are expected to ease into H2 and 2027. Meanwhile, all three operators are delivering their development plans on time and on budget, although the stronger peso has weighed on tariff realisation YTD. Each has responded differently to the shift to a WACC-based regulatory model, most notably GAP’s FIBRA E, which preserves its regulatory WACC and unlocks around MX$600 million of annual tax savings.
We see the market’s reaction to 2026 traffic as overdone. GAP is our preferred name, with the best long-term growth and strongest near-term catalysts. ASUR offers the best value, with Cancún T1 and Oaxaca catalysts, although we remain wary of its US strategy. OMA is a stable yield play and our smallest position.
Brazilian toll roads – delivering, with more to come
Motiva and Ecorodovias have delivered on most of last year’s calls. Both companies continue to deliver strong organic growth, supported by inflation-linked tolls, traffic growth above GDP and extensive demand-risk sharing. As per last year, the big organic theme remains margins, with both operators delivering on efficiency programs that should drive strong margin expansion over the rest of the decade. Capex execution has improved and new concessions are running ahead of plan. Growth is now coming from amendments to existing contracts rather than increasingly aggressive auctions, including Motiva’s AutoBAn and SPVias extensions and Ecorodovias’ Immigrantes Lane 3, which is not yet in company models. Amendment timing has slipped around the election, but the pipeline has grown. Importantly given the current rate environment, both companies are close to peak leverage. We remain positive on both names.
Rail – from expansion to cash generation
Our concerns about Rumo from last year have eased. It has completed its tariff reset, recovered market share and is pivoting from 11 years of cash-burning expansion to margin, cash generation and deleveraging. Capacity is more than 80% contracted for the rest of the year, and management expects about 10% EBITDA growth next year. The valuation is attractive and warrants a position, but the re-rating hinges on a manageable El Niño, leverage falling below 2x and a clean resolution of Cosan’s stake.
Brazilian utilities – networks over generation
- Generation – reform, but not the one needed. Reform compensated only part of the legacy curtailment losses and excluded the oversupply problem, curtailment is worsening and distress is spreading. New wind and solar investment has effectively stopped. Hydro is the exception: every operator we met is on the buy side and expects higher long-term power prices.
- Transmission – much needed but still competitive. Auction discounts now exceed 50%, squeezing returns on new lines while making operating assets more valuable. We remain positive on the assets but selective on exposure.
- Distribution – our favoured sub-sector. Concession renewals are signed and capex is running above plan, with a large stock of investment still to enter the asset base. The regulatory agenda, including smart-grid recognition and a review of the WACC methodology, offers further upside. Delinquency and extreme weather are the new watchpoints, and a forced Enel exit is the main M&A event.
Water – overhang removed, platform expanding
Sabesp’s first tariff reset removed last year’s key overhang, and Copasa’s privatisation, with Equatorial as reference shareholder, adds a new and arguably less demanding platform. The investment case now rests on executing very large capex programs and bidding with discipline. Equatorial remains one of our preferred ways to own both Brazilian distribution and water.
Conclusions – reaffirming LatAm conviction
This trip sees us reaffirm our investment in Latin America. The political and macro backdrop remains the key near-term catalyst, both positive and negative: Brazil's 25 October runoff, where Flávio Bolsonaro now holds the advantage, and the path of its real rates, and Mexico's USMCA review and fiscal position. But the fundamentals of the infrastructure operators are very strong, and the regulatory frameworks underpinning them are safe whoever wins. Near-term headwinds, notably Mexican airport traffic and high Brazilian real rates, are largely cyclical, and we believe the market has overreacted to them, leaving quality infrastructure names at very attractive valuations. A credible post-election fiscal anchor in Brazil and trade clarity in Mexico would be significant catalysts for a rerating.
As always, we maintain a diversified portfolio of high-quality infrastructure names globally, and at the moment, believe that parts of our LatAm universe are deserving of overweights.
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