Latin America: A New Frontier for ETF Industry Growth

Exchange traded funds providers may have found a new region in which to shop their wares: Latin America and it is not even the region’s largest economies, Brazil or Mexico, that is really helping facilitate ETF growth there.

Rather, it is Chile. Chile is most frequently known as the world’s largest copper producer to Western investors, but the country is home to less political instability and a more vibrant banking system than many of its LatAm counterparts. Copper, the primary source of government revenue, also backstops a tidy sovereign wealth fund that often goes unnoticed. [Chile ETF a Diversified Commodity Play]

Chile is helping ETF issuers grow in Latin America because the country uses  a private pension system that literally forces Chileans to be savers. Three decades ago, the country used a social security system similar to what is used in the U.S. Chile’s system went bankrupt.

After that, the government “redirected workers’ existing social security taxes to a new market-based system of investing choices that let workers make their own decisions in a program run by private companies,” according to Investor’s Business Daily. 

In other words, Chileans participate in a market-based pension plan, similar to the one some U.S. politicians have scared ordinary Americans out of thinking would be effective, with astounding results.  A recent “study shows the nation’s private retirement accounts provide workers pensions worth 87% of their salaries, 73% of that from profits on savings,” IBD reported.