Contributor: Philippe Carré
A couple of years ago you wouldn’t have been far wrong in thinking “Brazil” every time you read ‘Latin America’ or ‘LatAm’. But today there are vibrant, expanding markets throughout Central and South America: LatAm is now much more than Brazil.
Obviously Brazil, the 4th largest emerging market according to a recent study by The Economist, is still the biggest story. You can’t ignore a market that has experienced 67% growth in market volumes in 2010. And of course Mexico’s Bolsa de Valores is also booming, but the most dramatic growth over the next couple of years, in my opinion, will come from Argentina and the different markets that comprise ‘MILA’: Chile, Colombia and Peru.
The MILA initiative is very interesting — the acronym stands for ‘Integrated Latin America Market’ and marks an initiative started last November to consolidate the three local stock markets. The consolidation will standardize trading procedures and clearing and settlement rules, broaden liquidity, the increase the diversity of companies in which to invest.
This will also, of course, attract more international investment, not that there needs to be much more further incentive than the fact that all three markets gave a return of around 40% last year according to the MSCI dollar index.
Of the three markets, my attention is currently drawn to the opportunities in Chile. At an event in Santiago last month co-hosted by SunGard and the Santiago Stock Exchange, I couldn’t help noticing the energy and enthusiasm of all those present.
Perhaps this vibrancy pervades the whole of Chile and stems from the miraculous rescue of the San Jose gold and copper miners. Perhaps it has something to do with the charisma of the new President, Sebastian Pinera, who took office last year. But I think the good feeling is just as much to do with the forward-looking approach of the Santiago Stock Exchange itself. The exchange has supported FIX connectivity since 2006, and has embraced electronic trading (more than 10% of order flow to the exchange is now DMA) and actively sought high-frequency and algorithmic order flow. No wonder equity trading on the exchange increased by more that 30% last year.
In addition to the MILA tie-up, the Santiago Stock Exchange has also allied itself with Brazil’s BM&FBOVESPA. Late last year an agreement was reached to enable connectivity between the exchanges which will lead to further joint initiatives. SunGard plans to launch a connectivity hub to its SunGard Global Network in Santiago to facilitate international access to local and regional Andean markets. This new hub will complement the current SunGard Global Network connectivity hubs in Mexico City and Sao Paulo.
Initiatives like this, increasing connectivity and use of order routing networks, standardizing the investor experience, facilitating market development at every opportunity bodes very well for the Chilean market and in fact for investment in the whole of Latin America.