Latin America Banks Diversify Amid Shifting US Trade Policies

Latin American banks are prioritizing resilience in the face of shifting US trade policies by diversifying correspondent banks, payment rails, and access to USD liquidity. The dollar remains a dominant currency in the region due to its widespread use in trade, imports, commodities, debt servicing, and cross-border payments.

While local-currency settlement and regional payment initiatives are growing, there is still strong demand for dollars, particularly in countries with limited USD reserves. In some cases, dollarisation has reduced monetary flexibility and increased exposure to the Federal Reserve's policy cycle.

The growth of dollar-denominated stablecoins may reinforce the dollar's role, but it does not eliminate the need for regulated institutions, FX liquidity, correspondent relationships, and reliable dollar-clearing infrastructure.