There is a new exchange traded fund tracking Latin American equities and it excludes Brazil, the region’s largest economy. The Xtrackers MSCI Latin America Pacific Alliance ETF (NYSEArca: PACA) debuted last week.
“The Xtrackers MSCI Latin America Pacific Alliance ETF seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Latin America Pacific Alliance Capped Index,” according to DWS.
PACA debuted soon after national elections in Brazil that saw Jair Bolsonaro win the presidency there. Bolsonaro is inheriting a bevy of problems he must address during the course of his presidency and the faith of Brazil’s populace will hinge upon his success. Of course, Bolsonario’s biggest task is to help extract the country from its current economic doldrums, but his election is perceived by market experts as one that leans toward the benefit of the country’s capital markets.
By excluding Brazil, the new PACA is heavily allocated to Mexico, Latin America’s second-largest economy. Mexican stocks account for nearly 47% of the new ETF’s weight.
Mexico Heavy
PACA’s hefty Mexico exposure could prove advantageous as stocks there rebound following a new NAFTA deal with the U.S. and Canada.
According to President Trump, the deal would effectively eliminate the NAFTA name and would now be called The United States-Mexico Trade agreement. The Trump administration was pushing for a revamp of the NAFTA agreement prior to December 1 when Mexico turns over its leadership to the incoming administration of President-elect Andrés Manuel López Obrador.