Chile

One country I have always kept an eye on is Chile. To be clear this is an emerging market and there are some warts here. Keep that in mind.

A lot of attention has been given to Brazil because of how rich in natural resources the country is and how much demand is coming from Asia for those resources. Brazil has also drawn praise for taking steps to get its economic house in order. Investors have rewarded Brazil's capital markets for these reasons. Brazil is likely to continue to do well with these tailwinds and my clients have exposure to the country.

Chile would appear to have a very similar resource story but the economy is much further along the road to stabilization. Here are some numbers from Bloomberg Markets Magazine (I've mentioned this before but his magazine is a must read).
Country ....................... Brazil ................Chile
GDP per capita ...........$3244 .............$5736
inflation ..........................6.7% ................1.9%
GDP growth ...................5.7% ................5.1%
Unemployment ...........10.9% ................9.7%
B-mark Interest rate ..16.75% ..............2.25%

There is more to the story, but a good starting point for anyone to start learning about Chile is to know some of the numbers, the resources produced in the country and the pro-business government of President Ricardo Lagos.

Another good resource to read about this region is a magazine call Latin Trade. If you know of a good web site about Chile or the region, please let me know.

There are 25 Chilean ADRs (most of which trade on the NYSE). There is also the Chile Fund (CH). According to ETF connect, the fund has the following sector breakdown.

Electric Integrated
	17.21%
Diversified Operations
	16.99%
Telephone-Integrated
	12.17%
Paper & Related Products
	10.63%
Food & Beverages
	9.98%
Banking
	8.19%

The fund supposedly has a better than 5% yield. Well not exactly. In 2004 it paid capital gains totaling $0.66 per share and dividends totaling $0.08 per share. The distributions do get you to 5% but I'm not sure that you can count on capital gains every year. You can draw your own conclusion about this. If you buy into the story of growth in Chile it makes sense to think the fund will capture the effect regardless of the yield.

I have written before that if you are going to take the risk of stepping into an emerging market it makes sense to seek out companies that pay dividends. There are several banks that have high yields in Chile. At this point my clients have no exposure to Chile but I bought one of the banks in my wife's Roth IRA and it has a decent dividend.

The upside/downside of a common stock is chance for better total return but has issuer risk. For the fund you take no issuer risk but may not do as well as one good stock. This is probably obvious.

Keep in mind that the Chilean Exchange has a had a great run over the last two years. While I am clearly not early I don't believe I am late either. We will see.