Top European financial magazine says consumers key to Chile

Why international investors are looking beyond Latin America’s biggest markets and rethinking investment in Chile.  

Chile may have an expanding economy and growing presence on the international stage, but that’s largely down to the country’s rich natural resources, right?
Not according to the leading magazine Investment Europe, which reports that Chile’s valuable natural resources are only part of the equation. In fact, the country’s credible debt investment, reliable institutions and expanding middle class are as key to the Chilean success story as its booming copper mines.
“[Chile] was governed by very clever, conservative people and its economy was run well, similar to how things are done in Asia,” said Alan Nesbit, deputy head of global emerging market equities at First State Investments, to Investment Europe. “It was a very sensible place whereas the rest of Latin America was chaotic.”
Under Nesbit’s guidance, First State’s Latin American Fund now has one third of its 30 holdings invested in Chile and that foresight continues to bear fruit – in 2011, Chile’s economy expanded at almost twice the rate of that of Brazil.
But contrary to preconceptions, First State’s Latin American Fund holdings have not been placed in Chile’s enormous copper reserves.
Nesbit concedes that the profits generated by mining – much of which is conserved in government stabilization funds – has allowed Chile to sail through international economic disturbances; in 2008, he points out, the country emerged unscathed from the financial crisis while Mexico had a more difficult time.
But far more attractive, he says, is meeting the needs of Chile’s ever-expanding middle class in areas like housing, water, electricity and internet providers, investments which have been enhanced by increased liquidity in the domestic market.
The fund manager highlights utilities stocks as particularly enticing because they are governed by “very clear and unambiguous” regulations, in contrast to other countries in Latin America, where they can “change on a whim.”
Investment Europe is a pan-European publication that provides data and research articles for fund researchers and investment strategists who operate in the continent’s private and commercial banks, and other investment agencies.
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