From the September 01, 2012 issue of Futures Magazine • Subscribe!

Navigating Brazil's choppy waters

The IBovespa stock index (see “Stock market,” below) flirted with 68,000 for most of March and then slid to below 55,000 in June as the country’s biggest exchange-traded fund (ETF), the MSCI Brazil Index Fund (EWZ), bled almost $1.5 billion in assets. By mid-July, EWZ was down 8.8% year-to-date (see “Brazilian ETFs,” below), and money was flowing out of Brazil and into other Latin American countries.

“It is evident that the investors seeking exposure to Latin America are looking at some of the economies with better growth prospects,” says Neena Mishra, an analyst with Zack’s Investment Research. “The Global X FTSE Colombia 20 ETF (GXG) has gained about $37 million in assets under management and is up 15.1% in 2012, and the iShares MSCI Chile Investable Market Index (ECH) has gained about $57 million in assets under management and is up 7.6% during the same time.”

That may be a function of who Brazil hangs with compared to Colombia or Peru — neither of which belong to Mercosur (Mercado Común del Sur), the old-school lefty alliance that ties Brazil to Argentina, Paraguay, Uruguay and Venezuela instead of to the Pacific Alliance, which includes not only Colombia and Peru, but Chile and Mexico, and has been more practical in its approach to reducing trade barriers.

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