December 1994 saw Mexico’s peso collapse lock governments into dollar debt they could not print, branding the region with borrowing in foreign currency. Decades later, original sin appeared terminal after the Strait of Hormuz effectively closed with the Iran war, yet Latin American bonds refused to break. Regional spreads stayed flat while Asian peers bled, proving insulation now comes from structure rather than luck.

Brazil prints 96 per cent of sovereign debt in reals and Mexico more than 80 per cent in pesos, turning net commodity exports into dollar earnings that outpace liabilities. While Hormuz feeds 84 per cent of Asia’s crude, Latin America ships oil and gas outward, with 4.1mn barrels per day flowing from Brazil to China. Local returns outpaced emerging markets by nearly 15 percentage points as energy prices rewarded exporters without punishing sovereign spreads.

Past oil shocks always broke Latin American debt sequences by crushing dollar revenues against hard-currency bills, yet today’s credibility survives tighter budgets and disinflation. Argentina, Chile, Costa Rica and the Dominican Republic enforce spending caps to preserve confidence while currencies strengthen. Currencies once defined weakness now shield the region from spillover as Atlantic routes and balanced trade dilute dollar dominance.