The iShares MSCI Chile Capped ETF (NYSEArca: ECH), the lone ETF dedicated to tracking equities in the world’s largest copper-producing country, has been less bad than other Latin America regional and single-country exchange traded funds this year, but that does not mean the Chile ETF is a free lunch.
At least Chilean stocks are inexpensive. As in really inexpensive. As in downright cheap compared to their Latin American peers. In fact, Chilean stocks currently traded at the biggest discounts relative to the rest of Latin America since November 2009, according to Bloomberg.
Although Chile is viewed by some market observers as the most advanced and open South American economy and it is undeniably home to Latin America’s highest sovereign credit rating (AA-), there is also no denying the country’s dependence on copper exports as a driver of government revenue. [A Chilly View on the Chile ETF]
“Copper roughly represents 40% of the country’s export revenue and minerals constitute the majority of the revenue in total,” according to Emerging Equity.
Chile is grappling with high, by its standards, inflation.