Colombia ETF Could Pose Opportunity

Aug.15.10 | About: Global X (GXG)

As investors continue to be fearful of a double-dip recession or a lost decade in the US, Latin America, in particularly Colombia, and its exchange traded funds (ETFs) have reaped the benefits.

So far in 2010, the Bolsa de Valores de Colombia has surged more than 35% and the nation’s GDP has grown by nearly 5%. A major reason Colombia has seen such growth and prosperity, and is likely to continue to do so, is its supply of natural resources that the world demands. The Latin American nation is rich in oil, coal and gold, which are amongst the nation’s largest exports and account for nearly 13% of its GDP. What further boosts appeal for Latin America’s third most populous nation is that all three of these commodities are likely to remain in high demand in the coming years.

A second reason Colombia’s economy is expected to witness, or at the very least sustain, this growth, is that political instability in the region has started to ease. It appears the Colombian government is in complete control of their nation and threats of violence or a political uprising by the Revolutionary Armed Forces of Colombia (FARC) are no longer prevalent with a new President in office. This increase in political stability has resulted in a decline in violence, has opened up Colombia to international investment and has boosted domestic consumer spending.

Last, it seems like Colombia’s central bank has things under control. The nation’s 12-month running inflation rate is nearly 2% and it is highly likely that the central bank will be able to maintain its current benchmark lending rate of 3%.

An easy way to gain access to Colombia is through the Global X/InterBolsa FTSE Colombia 20 ETF (NYSEARCA:GXG), which is heavily weighted in financials and energy. Its top holdings include oil and gas exploration company Ecopetrol (NYSE:EC), financial services firm BanColombia (NYSE:CIB) and energy company Pacific Rubiales Energy.

Disclosure: No Positions