Latin America

Latin American ETFs are moving up mainly on expanding Chinese demand for natural resources. Commodity producers and long-term contracts for materials are attractive to China as inflation and deficit-proof assets. Domestic demand in Latin America continues to develop. In the meantime, a bet on Latin American ETFs is a bet on commodity prices, Chinese buying, and continued stability in the U.S. and Europe.

Recently, pan-Latin American ETF iShares Latin America 40 Index (NYSEArca:ILF) par-performing the U.S. benchmark SPY.

ILF is diversified by region and by sector. Brazil currently represents 60% of the fund. Mexico gets about 25%, Chile about 10%, and 5% is allocated to Peru. Currently the largest sector is materials, but ILF allocates about 20% to financials, 15% to telecommunications and over 10% to telecommunications. Growth tends to come from natural resources, which account for over 50% of the regions exports.

Challenges for Brazil are inflation, a rising currency and foreign capital inflows. Inflation is close to 6%. The Brazilian real has appreciated over 25% over the last two years. The increase is hurting the competitiveness of Brazils manufacturing sector. Policy interest rate in Brazil tops 10% attracting foreign capital.

Chile is also struggling with peso appreciation. Its government is joining an increasingly long list of foreign governments buying dollars in the currency markets in order to protect the competitiveness of exports, in Chiles case primarily the dollar price of copper.

Below a list of Latin American ETFs:

Pan Latin American ETFs

• iShares S&P Latin America 40 Index Fund (NYSEArca:ILF), 0.50%
• SPDR S&P Emerging Latin America ETF (NYSEArca:GML), 0.60%

Country Specific

• iShares MSCI Brazil Index Fund (NYSEArca:EWZ), 0.61%
• iShares MSCI Mexico Index Fund (NYSEArca:EWW), 0.53%
• iShares MSCI Chile Index Fund (NYSEArca:ECH), 0.61%
• MSCI All Peru Capped Index Fund (NYSEArca:EPU), 0.51%
• Global X/InterBolsa FTSE Colombia 20 ETF (NYSEArca:GXG), 0.86%

Sub-Sector Brazil

• Brazil Small-Cap ETF (NYSEArca:BRF), 0.71%
• EGS INDXX Brazil Infrastructure ETF (NYSEArca:BRXX), 0.85%
• Global X Brazil Consumer ETF(NYSEArca:BRAQ), 0.77%

Short/Leverage

• Direxion Latin America Bear 3X - Triple-Leveraged ETF (NYSEArca:LHB), 0.94%
• Direxion Latin America Bull 3X - Triple-Leveraged ETF (NYSEArca:LBJ), 0.94%
• ProShares UltraShort MSCI Brazil Index Fund (NYSEArca:BZQ), 0.95%
• ProShares UltraShort MSCI Mexico Investable Market Index Fund (NYSEArca:SMK), 0.95%