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Beyond Brazil, Part 2: Chile ETF

NEW YORK ( TheStreet) -- Mexico and Chile are the two Latin American economies that have moved beyond the emerging-market stage of development, and they are two of the larger single-country ETFs from the Latin America region. Investors looking for ways to play the region while avoiding Brazil, which dominates broad regional funds, should first look to these two country ETFs.

In part 1 of this series, I examined the ETF that tracks Mexico's economy. Now I'll look at an ETF that gives investors exposure to Chile.

Chile, a country of nearly 17 million people, is probably best known as a major copper exporter and for having perhaps the best run economy in Latin America.

The country's military overthrew an increasingly Marxist government in the 1970s and was ruled by Augusto Pinochet until democracy was restored in 1990.

The period of military rule was not without its problems, but economic progress was a focus of reforms.

When democracy was restored, the government continued to build upon those reforms, ultimately leading to Chile's recent addition to the Organisation for Economic Co-operation and Development, a group of nations that have advanced beyond the developing stage.

Chile's economy is reliant on copper, which accounts for about one-third of the government's revenue. Exports are roughly 40% of GDP, and the country has free trade agreements with the U.S., the European Union, China, India and South Korea, among others.

Despite the dependence on trade and resource exports, Chile has not seen the type of volatility associated with resource-dependent economies thanks to prudent fiscal management that banks the copper revenues during boom periods and spends them during the bust periods.

Investors can gain access this country's equity market via the iShares MSCI Chile Investable Market Index Fund (ECH). It has an expense ratio of 0.65%, total assets of about $375 million and ample liquidity, with more than 150,000 shares traded per day in the latest three-month period.

Despite the Chilean economy's reliance on copper exports, the fund has little direct exposure to the metal. Although it has 21% of assets in the materials sector, almost all of that exposure comes from three top-10 holdings engaged in fertilizers, wood and paper, and iron ore.

Mining is an energy-intensive industry, however, and the largest sector exposure comes via utilities, at 29% of this ETF. Much of this exposure is through the second and third largest holdings in the fund: Enersis (ENI - Get Report), with 11% of assets; and Empresa Nacional de Electricidad (EOC - Get Report), with 10.2%.
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ECH $37.83 -0.79%
ENI $8.64 0.93%
EOC $27.64 -0.77%
LFL $7.08 -1.50%
SAN $5.02 -0.20%


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