Latin American stocks and exchange traded funds helped lead last year’s emerging markets rebound. Included in that group is Colombia, South America’s second-largest economy, and the Global X MSCI Colombia 20 ETF (NYSEArca: GXG).
GXG, the benchmark ETF tracking Colombian equities, rose 24.1% last year, good for one of the best performances among emerging markets single-country ETFs.
It was just a few years ago when Colombia was one of the brightest emerging markets stars, but the commodities slumped experienced over the last two years pressured Colombian equities and GXG. Last year, Colombia’s central bank had to hike interest rates to cool inflation. Two years ago, Fitch Ratings upgraded its long-term foreign issuer default rating on Colombia, South America’s second-largest economy behind Brazil, to BBB from BBB-.
Latin America’s rebounding equity markets is luring some investors back to the exchange traded funds that track the region. Commodities play an important part in the Colombia investment thesis as the country is an oil exporter as well as being a major producer of precious and industrial metals, such as copper and silver.
“Colombia is a buy and is on the move right now. Colombia ticks all the boxes with regards sectoral flow analysis, even if one has to look past the official figures and into the murky drugs underworld and the black economy,” according to a Seeking Alpha analysis of the Colombian economy.
In recent years, Colombia’s production growth turned it into South America’s third-largest oil producer behind Brazil and OPEC member Venezuela. However, some of Colombia’s headline-making oil finds have not been as lucrative as previously hoped and Ecopetrol lacks the offshore heft to compete with other major global integrated oil companies.
Colombia reached a peace deal with the rebel group FARC last year, ending a bloody, decades-long rift with the peasant group.
“Colombia’s second-largest rebel group has agreed to free a prominent politician held captive for almost a year, clearing the way for repeatedly postponed peace talks to begin next month,” reports the New York Times.
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