When the world goes looking for shelter during an oil war, the destinations are predictable: the dollar, gold, short-term Treasuries. Nobody puts Latin American sovereign bonds on that list.

Yet as the dollar surged in March, the region’s average sovereign spread didn’t move. There was no contagion. The reason is structural, not lucky: as net commodity exporters borrowing in their own currencies, these governments earned more dollars from the crisis than they owed. This reflects, too, the shift in borrowing profile. Brazil issues 96 per cent of its sovereign debt in reals, for example. Mexico, more than 80 per cent in pesos.

And in the first quarter, with the Iran war already under way, Brazilian local bonds returned 7.3 per cent in dollar terms. Colombia, 4.2. Even Mexico, the regional laggard, eked out 0.3. All three carry the same “emerging market” label as Thailand, which fell 7.2 per cent, and India, which lost 5.9. Between the Brazilian and Thai bonds, there was a difference of nearly 15 percentage points in performance.

The first explanation for the disparities is geography. Asia takes 84 per cent of the crude that flows through Hormuz; Latin America takes virtually none…

Every oil shock in modern history has broken Latin American bonds — 1973, 1979, 1990, 2008. The sequence was always the same: a crisis drove the dollar up, commodity revenues collapsed and governments that had borrowed in dollars they could not print were left holding the bill. That was the original sin. And now it is mostly gone.

Here is more from Erika Mouynes at the FT.