After several years of dismal performances, Latin America exchange traded funds are roaring back in 2016 and have actually been leaders of the emerging markets resurgence. Rebounding commodities prices and the weaker dollar are key reasons why Latin America ETFs are rebounding.
Latin America’s central bank policies are notable, at least among the region’s two largest economies, Brazil and Mexico. Although Brazil’s central bank has not hiked interest rates since last year, its benchmark borrowing cost of 14.25% is among the highest in the world, emerging or developed markets. Earlier this year, Mexico’s central bank surprisingly raised rates to help prop up the peso.
Related: How Central Banks Affect LatAm ETFs
Mexico is at risk as its reserve coverage ratio, or foreign exchange reserves divided by its funding gap, is just 1.6 years, which is less than the seven years of Russia, another oil exporter. Additionally, Mexico is constrained by its near-zero real interest rate, leaving little room to cut rates if its economy weakens.[related_stories]
However, some market observers are enthusiastic about Mexico’s long-term prospects as the country aims to be home to one of the world’s 10 largest economies.
Let’s have a look at some of the best ETF avenues for accessing Latin American investment opportunities.
New Latin America ETFs
- Tierra XP Latin America Real Estate ETF (NYSEArca: LARE)
- BullMark LatAm Select Leaders ETF (NasdaqGS: BMLA)
Latin America Regional ETFs
- iShares Latin American 40 ETF (NYSEArca: ILF)
- SPDR S&P Emerging Latin America (NYSEArca: GML)
- First Trust Latin America AlphaDEX Fund (NYSE: FLN)
- Global X FTSE Andean 40 ETF (NYSEArca: AND)
Latin America Single-Country ETFs
- iShares MSCI Brazil Capped ETF (NYSEArca: EWZ)
- iShares MSCI Mexico Capped ETF (NYSEArca: EWW)
- iShares MSCI All Peru Capped ETF (NYSEArca: EPU)
- iShares MSCI Chile Capped ETF (NYSEArca: ECH)
- Global X MSCI Argentina ETF (NYSEArca: ARGT)
- Market Vectors Brazil Small-Cap ETF (NYSEArca: BRF)
- ProShares UltraShort MSCI Brazil Capped ETF (NYSEArca: BZQ)
- Global X Brazil Mid-Cap ETF (NYSEArca: BRAZ)
- Global X FTSE Colombia 20 ETF (NYSEArca: GXG)
- iShares MSCI Colombia Capped ETF (NYSEArca: ICOL)
- Direxion Daily Latin America Bull 3x Shares (NYSEArca: LBJ)
- Direxion Daily Brazil Bull 3x Shares (NYSEArca; BRZU)
- iShares MSCI Emerging Markets Latin America (NYSEArca: EEML)
- SPDR MSCI Mexico Quality Mix ETF (NYSEArca: QMEX)
- Deutsche X-trackers MSCI Mexico Hedged Equity Fund (NYSEArca: DBMX)
- iShares Currency Hedged MSCI Mexico (NYSEArca: HEWW)
For more information on the developing economies, visit our emerging markets category.
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.