If You're Hot on Chile, Try This ETF

Everyone's talking about investments in South America, and while Brazil is getting most of the attention, Chile offers several catalysts that I believe continue to make it an attractive investment destination.

One big theme for Chile is that it is copper rich and that exporting copper around the world helps to build up the infrastructure of ascending countries.

Places like China are not immune from economic or stock market cycles, so perceptions of spending on infrastructure will ebb and flow. But there will be plenty of flow for years to come, and Chile will benefit.

The other big catalyst is that Chile has what amounts to a privatized social security program. Roughly half of Chile's workers put 10% of their annual income into individual, self-managed pension accounts. This has been mandated by the government since 1981 and is viewed by some as a successful program that creates ongoing demand for equities with plenty of long-term visibility.

The combination of copper and mandated contributions makes Chile a less volatile way to access the emerging market/commodity theme; a Brazil-lite, so to speak.

The iShares MSCI Chile Fund(ECH Quote) has been less volatile in both directions than iShares MSCI Brazil Fund(EWZ Quote) since ECH's inception. This was one of the points I made in previous articles, which has been playing out thus far and I believe will continue to play out in the future.

Because Chile is a commodity-based country, it tends to be at different points in economic and stock market cycles than the U.S. That has provided a zig-zag effect for equity prices in previous cycles and also in the current cycle.