What are ADRs and why do they matter for global investors?
How ADRs work, which Latin American companies trade this way in New York, their advantages and risks, and how they differ from the local share.
Oct 22, 2026 · 4 min read
Petrobras, Vale, Itaú, América Móvil, FEMSA, SQM, Banco de Chile, Credicorp, Ecopetrol, Bancolombia, YPF, Grupo Galicia… All of them are Latin American companies, and all of them can be bought on the New York Stock Exchange, in dollars, as if they were US companies. That's possible thanks to ADRs.
What an ADR is
ADR stands for American Depositary Receipt. It works like this:
- A US bank buys shares of a foreign company on its local exchange (for example, Ecopetrol shares on the Colombian Stock Exchange).
- It holds them in custody and issues certificates that represent those shares.
- Those certificates, the ADRs, trade in New York in dollars.
Each ADR represents a fixed number of local shares. It's not always one-to-one: one ADR can be worth several shares on the home exchange.
In the explorer you can see all the Latin American ADRs in our universe. On each one's page we show its related local share, when there is one.
Why they matter
For many investors, ADRs solve several problems at once:
- Access: you buy them from the same account you use for US stocks, without opening accounts on other exchanges.
- Liquidity: some ADRs trade more in New York than the share does in its own country.
- Currency: they're quoted in dollars, which is convenient if you already think of your investments in that currency.
- Information: companies with ADRs usually publish information following the standards required by the US regulator.
An important detail: an ADR doesn't remove the local currency risk
It's a common mistake to think that, because the ADR is quoted in dollars, it carries no currency risk. That's not the case.
The ADR's price follows the local share price converted into dollars. If Vale's shares don't move in reais but the real falls 10%, Vale's ADR will fall roughly 10% in dollars. The ADR contains the Brazilian currency risk; it just expresses it in dollars.
Read more about this in currency risk.
ADR vs. local share: which is better?
| ADR in New York | Local share | |
|---|---|---|
| Purchase currency | Dollars | Local currency |
| Trading hours | New York exchange | Local exchange |
| Liquidity | High for the biggest ADRs | Varies |
| Costs | There may be a small custody fee | Local market fees |
| Economic risk | The same | The same |
In terms of company and country risk, they're practically the same thing. The difference lies in convenience, costs and trading hours. If you compare them in the optimizer, you'll see their correlation is very high: holding both doesn't diversify.
Companies listed directly in the US
Some Latin American companies don't use ADRs but list directly in the United States: MercadoLibre, Nu Holdings (Nubank), StoneCo, Globant, Credicorp or Copa Holdings, among others. To keep things simple, in the explorer we group them with the ADRs under the ADR label, because for the investor the effect is similar: a company from the region that you buy in dollars in New York.
ADR-specific risks
- Country risk: political changes, taxes or capital controls in the home country affect the ADR.
- Programs that get cancelled: a company can delist its ADR from the US exchange. In that case, holders can usually convert it into local shares or receive the equivalent value, but it's a hassle to keep in mind.
- Dividends and withholding: dividends may be subject to withholding tax in the home country. Check the rules of your country of residence.
- Time-zone differences: if the local exchange is closed for a holiday, the ADR can move in New York without a local reference.
How to use them in a portfolio
ADRs are a practical way to add Latin American exposure to a global portfolio. Some ideas:
- Diversify within the region: combine ADRs from different countries and sectors (a Peruvian miner, a Chilean bank, a Mexican consumer company).
- Cap the regional weight: since they tend to move together in crises, it's wise to set a maximum for Latin America.
- Compare with a regional ETF: a Latin America ETF holds many of these same names.
Try it
Load the "Latin America" example in the optimizer. It includes ADRs from Brazil, Mexico, Chile, Colombia, Peru and Argentina, plus MercadoLibre. Look at the correlation map: you'll probably see that many of them move quite closely together. Then add a US or Japan ETF and watch total risk go down.
Frequently asked questions
Does an ADR pay dividends? Yes. The depositary bank receives the local share's dividends, converts them into dollars and pays them to the ADR holders, sometimes minus a small fee.
Can I vote at shareholder meetings? In many programs, yes, through the depositary bank, although the process is less direct than with the local share.
Is there an equivalent in other countries? Yes. Europe has GDRs (Global Depositary Receipts), Argentina has CEDEARs and Brazil has BDRs: certificates traded locally that represent foreign shares, such as those of large US companies.
In short
ADRs bring major Latin American companies to any account that trades in New York, in dollars. They're convenient, but they don't remove the risk of the country or its currency. Use them as part of a diversified portfolio, not as a substitute for diversification.
Try it with your own assets
Build a list and see which portfolio the model calculates, in your currency.
Disclaimer: Educational and simulation tool. It is not investment advice or a personalized recommendation. Past performance does not guarantee future results.