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Beyond Brazil, Part 3: Colombia ETF

Stocks in this article: GXG EC CIB

NEW YORK ( TheStreet) -- Investors with greater risk appetites may want to move beyond Mexico and Chile and consider two smaller Latin America country ETFs: Colombia and Peru. In addition to greater risk, these country ETFs themselves are more volatile, with high concentrations in single sectors or companies.


Colombia, a country with a 20 million-person workforce, saw accelerating growth from 2002 to 2007, but stalled in its expansion when the credit crisis struck in 2008. Now some analysts are saying that equity exposure to the country should be increased.

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An improvement in domestic security has helped the economy over the past few years as U.S. equipment has assisted the military in gaining a strong upper hand in the decades-old civil war against the Revolutionary Armed Forces of Colombia, commonly known as FARC.

Also, the United Nations, in its annual drug trafficking report released this month, says that the manufacture of cocaine from Colombia, still the region's biggest producer, has decreased significantly, further signaling that the economy may benefit from a decrease in drug-related violence.

The economic recovery of two of its main trading partners, China and the United States, has helped improve the outlook for Colombia. Like many countries in Latin America, the country has significant commodity resources; high asset prices from global growth are beneficial to the economy.

The country is not without unsettling developments, however. A referendum in the near future may allow the country's president to run for a third term, and the prospect of such a vote has added volatility to Colombian markets. Also, the country continues to have poor relations with its neighbor Venezuela, which opposes U.S. involvement in Colombia, and exports to the nation have dropped significantly.

Short-term volatility must be an accepted state of affairs for investors in much of the developing world, and if ETF investors want to gain access to Colombia to tap into its economic outlook, their only option is the volatile Global X/InterBolsa FTSE Colombia 20 ETF (GXG).

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