Global Changes: Mexico and Chile

05/19/2016 10:00 am EST

Focus: ETFs

Jim Powell

Principal Analyst, Global Changes & Opportunities

Back in 2012 and 2013, I recommended investing in the emerging markets of Mexico and Chile; at the time I thought both markets had everything necessary for successful development, notes Jim Powell, editor of Global Changes & Opportunities Report.

While it turned out that I was too early, I remain convinced that I was correct in my estimate of each country’s prospects for growth.

Now it appears the emerging market recovery that I had been expecting is finally getting underway.

If I am correct, this should be a good time to buy the iShares MSCI Mexico Index Fund (EWW) and the iShares MSCI Chile Index Fund (ECH). Here is a brief review of each country’s strengths:

Mexico’s manufacturing revolution is continuing to expand. The country already exports more products to the US and other nations than all the other Latin American countries combined.

Mexico has free trade agreements with nearly 50 nations, which is more than China can claim. Mexico is also close to its US customers and can react quickly to their changing needs.

In addition, Mexican suppliers can deliver most of their products within a day or two. Perhaps best of all, the country is blessed with a young and energetic workforce that is determined to be successful.

As for Mexico’s drug trade and horrendous murder rate, I can only say it has little impact on its leading companies.

The situation is similar to what we see in many US cities where crimes often occur near corporate facilities, but they do not disturb operations – or earnings.

Meanwhile, Chile has made a remarkable free market transformation following the ouster of its brutal dictator Augusto Pinochet.

The country now ranks 7th on the Economic Freedom Index, which is two points above the US.

Chile also has a diversified economy and growing markets for its wines, fisheries, agricultural products, timber, tourism, and manufactured goods. Chile’s main economic asset is copper, and is the world’s largest supplier.

When the global economy collapsed during the Great Recession, so did the demand for copper. From its all-time high of $4.58/lb., copper fell to just $1.94/lb. Copper has since recovered to $2.26/lb.

If the rebound continues, the Chile ETF should respond quickly. If not, the payoff will take longer. Either way, I think Chile will deliver excellent returns.

Subscribe to Global Changes and Opportunities Report here…

By Jim Powell, Editor of Global Changes & Opportunities Report.

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