Colombia was the market investors loved to ignore. For years it traded at a steep discount to Brazil, Mexico and Chile because of political risk, falling oil output and a volatile peso. In 2026 that changed: the MSCI COLCAP is up more than 22% in pesos, and dollar-based investors captured the extra boost from a peso that rose about 30% in a year. Is it still the cheapest market in Latin America, or has the opportunity passed?
A quick scorecard
| Colombia | What it means | |
|---|---|---|
| 2026 local return | +22% | One of the best in the region |
| Currency (1 year) | Peso +30% vs. USD | Best-performing EM currency |
| Morgan Stanley base case (Nov 2025) | 2,280 by end-2026 | Already exceeded by about 11% |
| Morgan Stanley stance | Underweight | Cited fiscal clarity as the key condition for a structural recovery |
| Main index weights | Oil, banks, utilities | Concentrated in a few names |
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Open TradingView → · Affiliate linkThe case that Colombia is still cheap
- Starting point: even after the rally, Colombian stocks remain priced at a discount to regional peers on most earnings measures, a gap built over a decade of underperformance.
- Dividends: utilities and banks still pay meaningful dividends relative to price.
- Underowned: most global funds hold little or no Colombia, so incremental buying can move prices.
- Policy optionality: if the new government delivers fiscal credibility and reopens oil and gas exploration, the discount could narrow further.
The case that the easy money is gone
- Oil-driven earnings: a large part of the improvement comes from Brent at $116, which may not last.
- Currency already priced for perfection: local analysts see fair value for the peso well below current levels, which would hurt dollar returns.
- Competition from local rates: peso deposits and government bonds yield 11%–13%, a high hurdle for equities.
- Ecopetrol: the index’s heavyweight cut its dividend roughly in half this year.
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Try Koyfin → · Affiliate linkHow Colombia compares in the region
| Market | Main driver | Key risk |
|---|---|---|
| Colombia | Oil, rates, political re-rating | Oil reversal and carry unwind |
| Brazil | Rates, commodities, domestic demand | Fiscal policy |
| Mexico | Nearshoring, U.S. demand | Trade policy with the U.S. |
| Chile | Copper, lithium | China demand |
| Peru | Metals | Political instability |
Colombia has moved from “cheap and hated” to “reasonably priced and loved.” That is a meaningful shift. The biggest gains in markets like this usually come in the first phase, when sentiment turns, and Colombia has had that. From here, returns depend on earnings rather than re-rating, and on oil and the peso, which both look stretched. Our view: Colombia remains one of the cheaper markets in Latin America, but it is no longer the cheapest risk-adjusted bet. Investors adding now should size small and expect volatility, especially if oil falls.
Want the mechanics? See How to invest in Colombia from the U.S.
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