A look at one of the world's best performing stock markets - red hot Chile.
(PRWEB) August 25, 2005 -- Chile is about two times the size of Montana and has an incredible coastline of 2,650 miles. While only 3% of its land is arable, it has an amazing variety of climates and rich agricultural production. It gained its independence from Spain in 1810 and has 16 million citizens of which 90% are Catholic.
The Chile story is somewhat similar to Ireland before its economic takeoff. From 1978 to 1988, per capita income increased only $100 to reach $1,510.
Next, both a military government followed by democratically elected governments initiated market reforms and opened up the economy. Exports and foreign investment took off and debt levels came down. Foreign investors in Chile are treated the same as Chilean investors.
From 1991-1998 economic growth increased an average of 8% and per capita income on a purchasing power basis has grown to $10,700. Since then growth has moderated to a 4-5% range but public Chilean total public and foreign debt at 50% of GDP is very low relative to other Latin countries.
Trade is very important to Chile with exports accounting for 25% of GDP. It is rich in natural resources (copper, timber, fruit and fish) and has been busy signing free trade agreements. A Free Trade Agreement (FTA) with the US took effect in January 2004 and now 90% of Chiles exports to the US enter duty free. After a similar trade pact with South Korea last year, exports rose 50%.
Current President Ricardo Lagos Escobar is under pressure to improve economic growth rates and bring down the stubbornly high 8% unemployment rate. On the positive side, inflation and interest rates are low at 2-3%. Chile has demonstrated fiscal discipline and enjoys both a trade surplus and a budget surplus.
There are no country- specific ETFs for Chile but there is the Chile Fund (CH) which is a closed-end fund managed by Credit Suisse Asset Management. It is up 53% over the past year, trades at a 7.7% discount to its net asset value and sports a 4.6% yield. Keep in mind that 19% of the fund is invested in just one copper company Empresas Copec S.A. and the annual fee is high at 1.80%.
Another alternative would be the iShares Latin America 40 (ILF) which invests in Mexico, Brazil, Chile and Argentina. It is up an eye opening 67% over the past twelve months with an annual fee of only 0.55%. Currently, 49% of this exchange-traded fund is invested in Brazil, 38% in Mexico, 10% in Chile and 3% in Argentina.
Interested investors might also consider the ADR for Banco Santander (SAN) which is an excellent bank and a good proxy for the overall economy. It is up 42% over the past year and up 11% so far this year. Banco Santander is one of the 30 companies in the Chartwell Global 30 Index which is an alternative to the Dow Jones Industrial Average.
About the Author:
Delfeld, President of the global investment advisory firm Chartwell Partners, is also the publisher of the global investment letter Chartwell Advisor" which can be found at www.chartwelladvisor.com as well as at www.forbes.com. Delfeld represented the U.S. on the Executive Board of Directors of the Asian Development Bank in Manila, was an investment executive in Japan, Hong Kong and Sydney, and was an advisor on Asian financial affairs with the U.S. Treasury and the U.S. Joint Economic and U.S. Senate Finance Committee. He is the author of a new book The New Global Investor", studied at Harvard Universitys Asia Center, Keio University in Japan, and is a graduate of the Fletcher School of Law & Diplomacy.
Contact:
Carlton Delfeld
877-221-1496
cdelfeld@adelphia.net
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