Peace and Prosperity: The Best Latin American Investment

08.09.2016 • Emerging Markets

From James McKeigue – MoneyWeek Magazine (Great Britain) –

Last week, pictures of Colombian government negotiators posing awkwardly with ex-guerrillas in matching shirts were beamed around the world. The photo shoot was clumsy, but it got the message across: Colombia, long synonymous with armed insurgents and violent narcotics gangs, wants the world to know it is on the road to peace. It was also a distraction from depressing headlines produced by a slowing economy. Over the last two years the Colombian peso has lost 40% of its value against the dollar amid falling oil prices. For Colombia’s new middle class, born of an economic boom that started around 2000, imported gadgets and foreign holidays are becoming prohibitively expensive. The fall in the value of oil exports has widened the current-account deficit, while a smaller tax take has left the government with a budget shortfall.

Yet the downbeat headlines hide an exciting investment opportunity. The weak peso is boosting growth in other areas, such as manufacturing (growing at 6% a year), tourism and financial services. And for all of its woes, Colombia has avoided the economic travails of neighbors Brazil and Venezuela, both of which are in severe recessions. The boost from this currency depreciation will be sustained by major structural changes, such as the peace process and extensive investment in infrastructure, which should make Colombian industry even more competitive. Best of all, UK investors who buy in now get a great discount. Even after sterling’s post-Brexit fall, the Colombian peso is still 30% lower against the pound than it was at the start of 2013. That makes now a great time to buy Colombia on the cheap.

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