7 Reasons to Like Chile and Its ETF

Chile’s ETF, which launched in November 2007, hasn’t had the easiest of rides. But now that we’re in 2009, the future is starting to look a little brighter. Here’s why the country should be on your radar.

Gary Gordon for ETF Expert explains the differences between Chile’s ETF and its closed-end fund, The Chile Fund (CH), and how the performance of the two funds compare now that the economy appears to be recovering.

Meanwhile, let’s look at some of the reasons why many investors could begin to find Chile appealing once again after a slowdown that left no emerging market untouched.

• Chile is the world’s strongest exporter of copper, a metal that stands to benefit from a global recovery, thanks to its copious use in wiring and pipes
• Its gross domestic product (GDP) is as strong as any in Latin America
• Its budget is being kept in check
• By year’s end, Chile may be the first South American country to join the list of the world’s 30 richest countries, writes Andres Oppenheimer for The Miami Herald
• Its economy has grown steadily for the last two decades
• Chile boasts a poverty rate of 13%, down from 39% in 1990
• Chile just increased public spending by $5.7 billion this year to boost growth

iShares MSCI Chile Index (ECH): up 54.6% year-to-date

Comments

[Mad Hedge F...:]

Look at SQM. If we do move from a carbon to a lithium based economy, what are the implications? Will we all become mellow? Politicians, industrialists, and environmentalists who see battery powered vehicles as the wave of the future are overlooking the fact that 50% of the world reserves of lithium are found in impoverished, landlocked Bolivia. This is a country that until now was best known for killing off famous foreigners (Che Guevara, Butch Cassidy and the Sundance Kid), and being the source of a new form a venereal disease. Lithium ion batteries are four times more efficient than the current generation of nickel cadmium batteries, and are essential for electric cars to finally become economically viable. But now that the country finally has something the world wants, nationalism is rearing its ugly head. Local politicians see their country as the Saudi Arabia of the highly corrosive, toxic, reactive metal, and are already discussing ways to restrict access. Will La Paz become the headquarters of OLEC, the Organization of Lithium Exporting Countries? The only other supplies are to be found in Chile, Argentina, Australia, China, and Nevada. Will American oil company executives be programming their cell phones with the 591 country code? Should the US invade to insure supplies? Iraq worked didn’t it? The best way for opportunistic investors to play this is to buy Sociedad Quimica Y Minera (SQM), Chile’s largest producer of lithium.

Jun 30 05:25 PM

[User 305589:]

the problem I have with all the positive factors cited is, that they are almost all backward looking ones. And looking at copper, Chinese imports of the metal and the real demand that seems to be well short of those huge imports right now, I am not at all willing to bet on Chile as a leveraged copper play. Same with Nickel. there is a huge amount of financial speculation in these exchange traded metals. It is not real demand and no sign of a global economic recovery.
I'd be very, very careful at this point to add any equity exposure, no matter at what place of the globe. There are still some individual bargain stocks out there, but they have become very few, compared to just 2 months ago.

Jul 01 04:51 AM