ETF Digest

) -- There may have been some understandable skepticism when the

Global X FTSE Colombia 20 ETF

(GXG) - Get Report

was launched in 2009.

After all, when Americans thought about Colombia (if they did at all), the first things that likely came to mind were narco-terrorism and Pablo Escobar. They probably didn't think of a land of investment opportunity. But a lot has changed in the Latin American nation in recent years.

The government has made great strides toward combating the violence and kidnapping that made the country notoriously unsafe in the past few decades, and it has also made significant advances in weeding out institutional corruption.

Like other South American countries, Colombia is blessed with abundant natural resources. And with the fourth largest economy in Latin America, Colombia stands to gain handsomely from rising commodity prices worldwide.

Some of the country's main exports include oil, coal, coffee, and gold, and it is also the world's leading supplier of emeralds. Colombia and the U.S. have also recently finalized a free trade agreement, which should increase trade between the two countries.

The U.S. is currently Colombia's most important trade partner.

Colombia's GDP has risen considerably in the last two decades, from less than $50 billion in 1990 to nearly $288 billion in 2010, with an especially steep rise since 2003.

GXG seeks to track the FTSE Colombia 20 Index, which is composed of a basket of the 20 most liquid securities in the Colombian market.

The fund is heavily weighted in materials (26%), followed by financial services (21%) and energy (14%). Its No. 1 holding is

Ecopetrol SA

(EC) - Get Report

with a 14% allocation, followed by

BanColombia SA

(CIB) - Get Report

at 13%. It has a relatively high expense ratio of 0.78%.

GXG's top ten holdings account for about 70% of its assets under management.

Given Colombia's explosive growth, perhaps GXG's extraordinary performance since the market bottom in 2009 should be unsurprising. Since 2009 the ETF has seen gains of 209%, and it's currently trading at $21.33.

GXG isn't the only Colombia ETF game in town either. The

Market Vectors Colombia ETF


also provides exposure to the Colombian market with a slightly lower expense ratio (0.75% vs 0.78%) and less heavily concentrated holdings. It has just 10.7% invested in its number one holding, BanColombia, followed by Ecopetrol SA with 9.5%.

It has seen extremely light volume, however. its three-month average daily volume is just 526 shares. Compare that to GXG's average volume of 98,598.

GXG (blue) has outperformed COLX (red) for the past several months, but COLX has performed better in market downturns (November-December 2011).

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