The Ex Brazil trends are catching up resulting in stout increments in the asset banks of Peru and Chile ETFs[Equity Traded Funds] and healthy cash flows for large caps from the Andean region. The year to date returns of popular Chile funds stand at about 14% propagating a wide spread increase in the risk appetite for the frontier economies towards the south of Americas.
Recent studies have shown an increasing trend when it comes to investment in the commodity rich South American frontier nations. Investors are looking for more than the BRIC bowl, where growths are limited and economies are in consolidation mode. Global economic slowdown has turned the investors towards emerging markets and developing nations. An easy choice for most investors appears to be India or China. Past this you can reckon Latin American frontiers.
The nations in the Andean region have many a times been outside the investment boundary, as majorly people have focused their moneys in Brazil. The region which covers the nations of Chile, Peru and Colombia boasts of economies that have a relatively moderate inflation level compared to Brazil and a decent GDP.
A handier look – Andean Economies
Chile presents a bright picture denoting political stability and rising consumer demand. The economy is growing at a rate of around 4.3% and is fast catching up with Brazil. Chile has bagged the tag of the largest producer and exporter of copper and in fact a model example to be cited when propagating investments in these parts of South America. Any strategy which is positively long on precious and industrial metals will find rational to consume that an improved global sentiment will onset a faster growth at the Andean ETF front which can very well be sustained for coming few years relying on the infrastructural growth that will take place and prominence of the middle class consumers.
Apart from being the largest producer of Silver and Gold in the world, Peru is young and thriving country which offers a higher potential upside than most of the developed nations and popular investment destinations.
Peru ETFs are available as broader products to tap this corner of Latin America. According to International Monetary Fund Peruvian economy was estimated to grow at the rate of 5.9% for the year 2012 though it’s slightly below prediction complying in line with the recent slowdown in United States of America.
Prime growth boosters are the material and the commodity sector and recent price hikes have added more than just confidence in the capital markets, although most analysts long on this class have clearly expressed their dependency on the projected rise in the internal consumption.
Colombia on the other hand is an enticing play due its extensive reservoir of natural resources especially rich in oil and natural gas reserves. As we have seen in the past, equity markets should couple with a crude rally. Oil stocks like Eco Petrol are already available to foreign investors through their ADRs and pure play Colombia funds. Pro development fiscal policies and healthy governmental intervention has brought down inflation levels in this country and markets have consistently delivered returns marked in black.
Policy drafters at Colombia, Peru and Chile are moving together in strengthening their geographical domain to attract overseas investments through a cross border trading platform. The idea of a consolidated exchange has been such a hit with investors that even Mexico is mulling on joining, in which case the combined market cap of this united front may exceed that of the Brazilian I Bovespa.
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