If you think that Mexico is the new investment hub then consider this; the combined market capital of the Andean nations [Chile, Peru and Columbia] is not only 200 billion dollars bigger but is even touted to cross over one trillion dollar worth of investments by 2021.
The good economic progress has understandably created interest on the streets as well and first world investors can seek this exposure through market traded Peru ETFs or Chile ETFs. Funds that are heavy on Brazil were once too considered a play on the Andean, but now in the wake of negligent economic growth and fears that Brazil may opt out of BRIC, an ex Brazil trend is very visible.
A market traded fund that is a pure play on these countries, enable a latent exposure to an otherwise risky trade and instead of betting on one or two individual stocks, investors acquire a basket of the most liquid and large cap equity from the east coast of Latin America.
The FTSE listed Andean 40 index relates to the performance of the top 40 stocks from these countries and has delivered a fantastic return spread in the past twelve months.
The bench mark has given 20% YTD [year to date] returns ending 31st December 2012 and this is amid an hostile economic environ where the neighboring countries are either on the verge of sovereign bankruptcy or are running out of ideas to stimulate their economies.
The tri nation forum has learned and gained much in the last decade or so and with an outright pro trade stand, the strong governance in the Andean region has become more or less an exemplary effort of effective international trade policies that are centered around reduction of trade barriers and aids in comfort of doing business for the foreign investors.
The state of Chile is the largest exporter of Copper in the world and apart from being blessed with natural resources, it also enjoys the company of foresighted policy makers who were quick enough to develop their Asian Markets to cover up for the losses that were to be arising from the Euro tragedy. The country has shown a consistent +4% growth and even in the past has more than once outshined bigger countries lie Argentina in terms of attracting foreign investments.
Peru has grown 6% in 2012 and is among the fastest growing in the world. Fundamentals of investments in the nation hover a lot around Gold and Silver as Peru is the biggest global producer for both. The country has gained a lot in recent past due to the disparity in supply and demand of the precious metals.
Columbia is the leader of the group, though not in the literal but the fiscal sense. The current government has been good with taming the inflation and being the largest economy of the Andean region, it has taken optimum advantage of its excellent trade ties with the United States to boost the economic activities in the entire Eastern Latin coastline. The government has wisely used the American aid to deal with narco-terrorism problems, which are now more or less eradicated thanks to which, Columbia today is a transformed world of growth and opportunities.
The greed to invest in the emerging and frontier markets is well justified and with proven results. Exposure to andean fund is most risk free route to cash in on the massive infrastructure and economic progress, which is bound to occur in this region, sooner or later. Till then increasing long exposure on all cyclic dips is recommended.
Andean Global X Fund [AND] is an exclusive pure play on the top stocks of the three countries of Colombia, Peru and Chile. At an annual expense of 0.72% this Chile ETF relates to the yield of its benchmark; FTSE Andean 40 Index. The biggest holding for Andean ETF is ECO PETROL ADR with 10% of allocations.