Currently, an unprecedented event is occurring in the Andean region. Chile, Colombia and Peru are in the operating stages of testing and solidifying their ambitious venture of integrating their stock markets. The integrated market will be known as MILA (Mercado Integrado Latinoamericano), and it will market itself as Latin America’s largest stock market in terms of stocks listed (566 companies listed) and second to Brazil in market capitalization ($614 billion).
Putting this into perspective, in the U.S. we are able to buy Colombian stocks, via ADRs (American Depository Receipts), but we only have access to two Colombian stocks (BanColombia, Ecopetrol) out of 86 and one exchange-traded fund (GXG 20). Chile has 230 stocks listed in their exchange, and the U.S. only have access to twelve of them and one exchange-traded fund dedicated to Chile. To make matters more difficult for investors in pursuit of diversifying their portfolio, before the implementation of MILA, Colombians and Peruvians had virtually no access to stocks on the Chilean exchanges, and vice versa. With the integration of the three stock markets a Peruvian residing in Lima will be able to buy stocks from Colombia, and for that matter a Colombian investor from Medellin will be able to add Chilean stocks to his portfolio.
In the international markets, emerging markets such as China, India, and Brazil are in vogue. It’s hard to argue the consensus that these markets are robust and have contributed to the international recovery of the Great Recession. Also, due to the popularity of China as a hotspot to place foreign capital, China’s neighboring countries are able to capture the attention from international investors. Never before have Vietnam, Korea and even Cambodia been on the radar as they are now for investment potential. Therefore, to compete with Asia is difficult; as such, Colombia, Chile and Peru seemed to agree on integrating their stock markets in order to become more competitive and attract more attention from investors.
However, it seems that Latin American countries will over exert their persuasion skills in convincing the international audience to take a look at their stock markets. Without much buzz or media attention Latin America is silently generating attractive opportunities for international investors, and most importantly, local investors. For instance, Colombia’s stock market on average in the last three years has generated returns of 25.1%. Chile’s stock market boasts a one-year average of 32.1%. Peru too can feel confident of itself, being on the cusp of becoming an economic darling in the region with an estimated 2010 GDP growth of roughly 9% coupled with Lima’s stock market skyrocketing to 2010 returns of 65%.
Despite the rosy numbers Latin America has a notorious reputation when it comes to their economic policies—high inflation, high unemployment, tight controls and regulations on free enterprise, corruption, and never ending red tape. Latin America has also been struggling with another image painted by the news headlines—with merit—on its recent movement to the left; thus, turning its back to free markets. We don’t have to dig deep to believe Latin America is adopting socialistic policies, with Chavez in Venezuela nationalizing the coffee and dairy industry, Bolivia’s Evo Morales seizing the natural gas industry, Rafael Correra in Ecuador imposing an oil nationalization law, and Argentina’s Kirchner taking full control of their national pension system.
In the midst of governments nationalizing industries and institutions, Latin America has another side to the coin that is embracing free markets and enterprise, led by Brazil and Chile, with Colombia, Uruguay and Peru on the same trail.
With the existence of two completely different ideologies in Latin America, MILA could play a pivotal role in contributing to economic growth and solidarity within the Latin American community. It should also play a factor in accelerating the speed of globalization, by increasing trade among Chile, Colombia, and Peru. MILA can indirectly reduce the tension of past or current issues that each country has with each other-especially concerning Chile and Peru’s border disputes.
If we look at the origin of the EU as an example, the economic integration gradually brought them closer politically. In the view of an optimist, MILA can produce the same outcome, or at the very least set precedence for future stock market integrations for emerging markets.
a global affairs media network
Market Integration to Spur Investment Opportunity for Latin America
January 25, 2011
Currently, an unprecedented event is occurring in the Andean region. Chile, Colombia and Peru are in the operating stages of testing and solidifying their ambitious venture of integrating their stock markets. The integrated market will be known as MILA (Mercado Integrado Latinoamericano), and it will market itself as Latin America’s largest stock market in terms of stocks listed (566 companies listed) and second to Brazil in market capitalization ($614 billion).
Putting this into perspective, in the U.S. we are able to buy Colombian stocks, via ADRs (American Depository Receipts), but we only have access to two Colombian stocks (BanColombia, Ecopetrol) out of 86 and one exchange-traded fund (GXG 20). Chile has 230 stocks listed in their exchange, and the U.S. only have access to twelve of them and one exchange-traded fund dedicated to Chile. To make matters more difficult for investors in pursuit of diversifying their portfolio, before the implementation of MILA, Colombians and Peruvians had virtually no access to stocks on the Chilean exchanges, and vice versa. With the integration of the three stock markets a Peruvian residing in Lima will be able to buy stocks from Colombia, and for that matter a Colombian investor from Medellin will be able to add Chilean stocks to his portfolio.
In the international markets, emerging markets such as China, India, and Brazil are in vogue. It’s hard to argue the consensus that these markets are robust and have contributed to the international recovery of the Great Recession. Also, due to the popularity of China as a hotspot to place foreign capital, China’s neighboring countries are able to capture the attention from international investors. Never before have Vietnam, Korea and even Cambodia been on the radar as they are now for investment potential. Therefore, to compete with Asia is difficult; as such, Colombia, Chile and Peru seemed to agree on integrating their stock markets in order to become more competitive and attract more attention from investors.
However, it seems that Latin American countries will over exert their persuasion skills in convincing the international audience to take a look at their stock markets. Without much buzz or media attention Latin America is silently generating attractive opportunities for international investors, and most importantly, local investors. For instance, Colombia’s stock market on average in the last three years has generated returns of 25.1%. Chile’s stock market boasts a one-year average of 32.1%. Peru too can feel confident of itself, being on the cusp of becoming an economic darling in the region with an estimated 2010 GDP growth of roughly 9% coupled with Lima’s stock market skyrocketing to 2010 returns of 65%.
Despite the rosy numbers Latin America has a notorious reputation when it comes to their economic policies—high inflation, high unemployment, tight controls and regulations on free enterprise, corruption, and never ending red tape. Latin America has also been struggling with another image painted by the news headlines—with merit—on its recent movement to the left; thus, turning its back to free markets. We don’t have to dig deep to believe Latin America is adopting socialistic policies, with Chavez in Venezuela nationalizing the coffee and dairy industry, Bolivia’s Evo Morales seizing the natural gas industry, Rafael Correra in Ecuador imposing an oil nationalization law, and Argentina’s Kirchner taking full control of their national pension system.
In the midst of governments nationalizing industries and institutions, Latin America has another side to the coin that is embracing free markets and enterprise, led by Brazil and Chile, with Colombia, Uruguay and Peru on the same trail.
With the existence of two completely different ideologies in Latin America, MILA could play a pivotal role in contributing to economic growth and solidarity within the Latin American community. It should also play a factor in accelerating the speed of globalization, by increasing trade among Chile, Colombia, and Peru. MILA can indirectly reduce the tension of past or current issues that each country has with each other-especially concerning Chile and Peru’s border disputes.
If we look at the origin of the EU as an example, the economic integration gradually brought them closer politically. In the view of an optimist, MILA can produce the same outcome, or at the very least set precedence for future stock market integrations for emerging markets.
