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A Convincing Latin America ETF to Bet On

In a year of strength for emerging markets equities and exchange traded funds, Latin America is driving that resurgence. Rebounding commodities prices and the weaker dollar are key reasons why Latin America ETFs are rebounding.

Several single-country ETFs tracking Latin American economies are among this year’s standout performers. That group includes the Gl obal X MSCI ETF (GXG) , the largest exchange traded fund tracking South America’s second-largest economy.

Colombia is a major producer of silver, copper and, to a lesser extent, gold. Colombia is also one of South America’s biggest oil producers. In recent years, Colombia’s production growth turned it into South America’s third-largest oil producer behind Brazil and OPEC member Venezuela. However, some of Colombia’s headline-making oil finds have not been as lucrative as previously hoped and Ecopetrol lacks the offshore heft to compete with other major global integrated oil companies.

SEE MORE: Commodities Lift This EM ETF

Last month, the country “reached a long-awaited agreement on a cease-fire and the terms of a permanent peace with the country’s largest insurgent group, the Revolutionary Armed Forces of Colombia, or FARC. The deal could ignite high hopes for an economic rebound in the coming years—and an opportunity for investors to ride the early wave of likely winners in the region,” reports Manuela Badawy for Barron’s.

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GXG recently transitioned to the MSCI All Colombia Select 25/50 Index from the MSCI Colombia Capped Index, according to New York-based Global X.

“The MSCI All Colombia Select 25/50 Index applies additional liquidity screens on the MSCI All Colombia Index, which is designed to represent the performance of the broad Colombia equity universe. GXG is the largest Colombia-focused ETF in the United States, with over $80 million in assets under management[1] and will retain its name,” according to a statement issued by Global X.

GXG’s new index has 22 holdings compared to 28 for the ETF’s current index.

SEE MORE: Index Change for the Colombia ETF

“The treaty will probably lead to higher government spending—on infrastructure, health, and education in poorer rural areas where FARC operated. The cost of implementing the deal is estimated from $15 billion to $45 billion, or 5% to 15% of gross domestic product spread out over the years, says Capital Economics; thus, spending will probably have to rise in the near term,” according to Barron’s.

For more information on the developing economies, visit our emerging markets category.

Gl obal X MSCI ETF


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.