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Chile Leads The Latin Pack
By: Carl Delfeld

Everyone's talking about China. Don't miss the opportunities in Chile.

Yes. Chile with an "LE" not "NA"

While the whole region is back in favor with investors, it seems appropriate to highlight Chile which is the economic star of Latin America.

Chile is about two times the size of Montana and has an incredible coastline of 2,650 miles. While only 3f its land is arable, it has an amazing variety of climates and rich agricultural production. It gained its independence from Spain in 1810 and has 16 million citizens of which 90
re Catholic.

The Chile story is somewhat similar to Ireland before its economic takeoff. From 1978 to 1988, per capita income increased only $100 to reach $1,510.

Next, both a military government followed by democratically elected governments initiated market reforms and opened up the economy. Exports and foreign investment took off and debt levels came down. Foreign investors in Chile are treated the same as Chilean investors.

Chile's Take Off and Steady Growth

From 1991-1998 economic growth increased an average of 8
nd per capita income on a purchasing power basis has grown to $10,700. Since then growth has moderated to a 4-5ange but a total Chilean public and foreign debt at 50f GDP is very low relative to other Latin countries.

Trade is very important to Chile with exports accounting for 25f GDP. It is rich in natural resources (copper, timber, fruit and fish) and has been busy signing free trade agreements. A Free Trade Agreement (FTA) with the US took effect in January 2004 and now 90f Chile’s exports to the US enter duty free. After a similar trade pact with South Korea last year, exports rose 50í

Current President Ricardo Lagos Escobar is under pressure to improve economic growth rates and bring down the stubbornly high 8nemployment rate. On the positive side, inflation and interest rates are low at 2-3àChile has demonstrated fiscal discipline and enjoys both a trade surplus and a budget surplus.

How to Take Advantage

There are no country- specific ETF’s for Chile but there is the Chile Fund (CH) which is a closed-end fund managed by Credit Suisse Asset Management. It is up 53ver the past year, trades at a 7.7iscount to its net asset value and sports a 4.6ield. Keep in mind that 19f the fund is invested in just one copper company Empresas Copec S.A. and the annual fee is high at 1.80à

Another alternative would be the iShares Latin America 40 (ILF) which invests in Mexico, Brazil, Chile and Argentina. It is up an eye opening 67ver the past twelve months with an annual fee of only 0.55à Currently, 49f this exchange-traded fund is invested in Brazil, 38n Mexico, 10n Chile and 3n Argentina.

Interested investors might also consider the ADR for Banco Santander (SAN) which is an excellent bank and a good proxy for the overall economy. It is up 42ver the past year and up 11o far this year. Banco Santander is one of the 30 companies in the Chartwell Global 30 Index which is an alternative to the Dow Jones Industrial Average.

About the author:
Carl Delfeld is head of the global advisory firm Chartwell Partners and is editor of the “Chartwell Advisor” and the “Asia Investor Intelligence” newsletters. He served on the Executive Board of Directors of the Asian Development Bank in Manila and is the author of The New Global Investor (iUniverse: 2005). For more information go to http://www.chartwelladvisor.comor call 877-221-1496.

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