Investors call for increased integration

Investors call for increased integration

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Latin America's economies stand to gain from increased integration, building on the lessons learned from the Pacific Alliance and its MILA trading platform, panelists said at LatinFinance's 11th Andean Finance & Investment Forum in Cartagena on Thursday.

"We have behaved badly as countries in the region," said Roberto Belchior, director for market development in Latin America for the Brazilian stock exchange B3. "There is no way Latin American countries will get on investor radars unless we behave as a region. I mean from Mexico to Patagonia."

Latin America requires massive infrastructure investments in the coming years but it cannot rely on local capital to do it alone, Belchior said as an example.

"We are good at exporting wealth to other regions... but not as good at attracting wealth to the region," he said. "First and foremost, we have got to put the Atlantic and the Pacific together."

Belchior called MILA a "great idea" but added that capital flows have not materialized. Momentum is building, however, and B3 and other stock markets in the region are creating instruments to increase the flow of capital, such as passport funds and Latin depositary receipts.

B3, the result of the merger between BM&FBovespa and Cetip, owns equity stakes in stock markets in Chile, Colombia, Mexico and Peru.

According to Andres Velasco, general director of macroeconomic policy at Colombia's finance ministry, the different countries in the region face different challenges. 

Colombia needs to invest in infrastructure, education and the peace process, while Peru needs to address issues with the financial system, reduce its reliance on the mining sector and possibly devalue its currency. Mexico, meanwhile, has to deal with uncertainty from the US, Velasco said.

For Bernardo Vargas, CEO of the Colombian power company ISA, the electricity sector could benefit from increased integration across borders.

"Chile has generation [plants] in the north but no way to get it to southern Peru or even southern Chile," he said. The big question remains how to incorporate Brazil, he added.

Steven Costabile, the global head of the private funds group at PineBridge Investments, said investors have looked at Brazil as a "proxy" over the past few years, regardless of what has happened in the rest of Latin America.

PineBridge did not consider investments in Brazil for a time, but now the country has come back into play as it rises out of recession, Costabile said. 

"We were out of Brazil, but now it is back on the radar screen," he said. After Brazil, comes Mexico, he added.

Over the long term, investors could increase their allocations to Latin America as they continue the search for yield and move into alternative investments, such as private market credit and infrastructure, Costabile said.

"Latin America is not getting its fair share, but it is coming. This is going to be a long-term trend," he said.