ETFs Could Partake in Argentina's Allure

While South Carolina Governor Mark Sanford and his friend Maria may have seen Argentina as the home of their "hopelessly impossible situation of love," ETF investors are likely to see the nation as one of the newest additions to the growing list of exchange-traded funds.

ETF Database reports that Argentina is one of three possible candidates for the next Latin America ETF. The other two are Venezuela and Panama. The Web site reviews the nations' individual strengths and weaknesses.

Argentina is currently the 30th-largest economy in the world. It boasts a large number of natural resources, and for some investors who are looking to tap Latin America's potential, it seems to be the most logical choice. The country itself has seen some hard times, however. In recent years, the nation's currency suffered huge devaluation coupled with high unemployment. Lately, it has managed to bounce back. Nevertheless, the global recession has hit the country harder than others.

Venezuela is an option, although the possibility of a U.S.-based ETF is unlikely, given the tensions between the nation's president, Chavez, and the U.S. However, the country does boast a large number of natural resources, including oil. Its economy also ranks in size just below Argentina's at No. 31. If the strain between the two nations continues, especially with the recent news of the coup in Honduras, it is unlikely that this ETF will show up in the near future if the current trend of destabilization continues.

Finally, Panama's rapid economic growth has caught the attention of the ETF world and may prove to be a viable option. The country boasts strong banking, trading and tourism, which have helped it become the fastest-growing economy and consumer in Central America. At this rate, the country is also expected to rank as the fastest-growing economy relative to Latin America behind Peru, the most recent addition to the Latin American ETF family.

Over 800 ETFs currently exist. However, there is plenty of evidence showing that places like South America and Central America provide plenty of room for more. ETF investors are beginning to see Latin America as a great place to bank on the growth of emerging nations.

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Know What You Own: Currency exchange-traded funds include the Wisdom Tree Euro ETF (EU - commentary - Trade Now), the CurrencyShares Japanese Yen Trust ETF (FXY - commentary - Trade Now), the Currency Shares Australian Dollar Trust (FXA - commentary - Trade Now), the CurrencyShares Swedish Krona Trust (FXS - commentary - Trade Now), the CurrencyShares Swiss Franc Trust (FXF - commentary - Trade Now) and the WisdomTree Dreyfus Chinese Yuan Fund (CYB - commentary - Trade Now).

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Don Dion is the publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.