With forecasts of a cold blast of weather this week, I turned my thoughts southward searching for better temperatures. Likewise, investors may want to consider looking to the south (as in South America) for better investment returns.
Long regarded as unstable, something extraordinary has happened in South America this year. The two largest countries on the continent, Brazil and Colombia, had elections. The result? Nothing. Or better put, nothing abnormal. Both countries had normal elections, with normal candidates, and normal results with no rioting or allegations of fraud. They are becoming normal countries.
While many may be familiar with Brazil as part of the BRICs (the emerging economies of Brazil, Russia, India and China), fewer are aware of the positive economic story of Colombia. Once known for its drug cartels, today’s Colombia is an investor-friendly country with low inflation and strong economic growth over the last decade. Already the fifth largest exporter of oil to the US (and the largest exporter of coal), Colombia is undergoing an investment renaissance in oil exploration and the country expects its oil production will double over the next five years.
The positive economic stories are not limited to the borders of Brazil and Colombia. Peru and Chile both have inflation well contained and have posted exceptional GDP growth this year (Peru 8%+; Chile over 5.5%, even with a major earthquake this spring) with more of the same expected for 2011.
Not only do these four countries have strong economies, but they also have abundant fresh water supplies, ample mineral reserves, productive agricultural lands, and young populations with a growing middle class. With all of these positives providing a backdrop for continued economic growth over the long term, investor portfolios may warm to a more southerly exposure.