LatinFinance - May/June 2015 - 42

and 80%, respectively.
However, in Mexico, the cap remains
at 20%, and country risk requirements in
Chile rule out a lot of investment opportunities in the region. A Chilean fund that wants
to invest in Colombia, for example, has to
use an intermediary, says Augusto Iglesias,
senior partner of PrimAmérica Consultores, a Santiago-based consulting firm.
"A Peruvian fund knows a lot more
about the Chilean or Colombian market
than about markets in Asia, for example.
We want to be able to take advantage of the
excellent opportunities for investment out
there," says Guillermo Arthur, president of
FIAP.
The benefits of increased investment in
the region would be twofold. First, it would
open investment options and allow funds to
more easily participate in attractive markets
just next door. And second, it would boost
the region's economy.
Loosening regulations would help improve liquidity across markets, as well as
increasing the chance for funds to diversify,
says Danielle Tierney, a senior analyst
specializing in Latin America at Aite Group,
a financial services research and advisory
firm. "Colombia might have only three or
four decent retail stocks, but by opening
up to Peru and to Chile, funds would have
access all of a sudden to choices of 20 retail
stocks," she says.
But Mazzoni of Fund Pro says that diversification opportunities are not so big even
with a free flow of investment.
"The Andean countries are pretty similar these days. They have more or less the
same inflation rates. Across the region you
have banks, you have mining. Chile is the
strongest economy, but Peru is the fastest
growing. Colombia is in the middle. But
overall they are quite similar," he says.
The most significant addition to funds
in the region would be access to the
Mexican market and its much more diverse
economy.
Trillion-dollar potential
Iglesias of PrimAmérica says changes to
pension fund regulation is just one way the
region is moving toward integrating the
financial markets and promoting regional
and international money flows. His consulting firm advises FIAP and the Mercado
Integrado Latinoamericano, or MILA, on
strategies to promote integration.
MILA is a collaboration between four
regional stock exchanges, founded with
participation from Chile, Peru, and Colom-

42 L ATINFINA NCE.COM - May/June 2015

bia in 2011. With the addition of Mexico last
year, it is Latin America's largest bourse
by market capitalization, at more than $1
trillion. However, trading volume has been
very low so far.
"The point of the MILA integration was
that it was supposed to bypass the taxation
and cross-border issues. It hasn't been able
to fully achieve that yet," says Tierney. "But
the important point is that the structure is
there."
Iglesias says the process will take time.
FIAP and MILA are
pushing for an anUnder the limit
nual meeting where
System-wide pension fund allocations in Pacific Alliance countries
political leaders
180
from the Pacific
Alliance countries
160
would set a coordi140
nated agenda for in120
tegration measures
going forward.
100
Iglesias says inte80
gration would allow
such large players
60
to replicate invest40
ment strategies
across markets. It
20
would also benefit
0
regional banks and
Chile
Mexico
Colombia
Peru
brokers, who have
Assets under management
Amount allocated internationally
International allocation cap
the best distribuSource: FIAP, SBS. Data to December 2014
tion capacity in the
region, Mazzoni says.
One proponent of regional integration
is Sura Asset Management, the largest fund
manager on the continent. The majority of
its $114 billion in assets come through pension funds, including AFP Integra in Peru
and AFP Capital in Chile.
GUILLERMO ARTHUR, FIAP
Juan Camilo Osorio, vice president for
investment at Sura Asset Management, says
his company is "prepared to seize the opportunities that the alliance and the regulatory changes would potentially offer".
He points out as an example Sura's
recently launched a Pacific Alliance equity
strategy that calls for investing in the stock
markets of Mexico, Colombia, Peru, and
Chile. It is already available to customers
in Chile, and soon will be in the other three
members of the pact.
The benefits of further liberalization of
investment rules between LatAm countries
are vast, says Tierney. "These markets are
maturing, not so much in size but definitely
in structure and technology. By removing
hindrances to cross-border flows, they
will further their development and market
growth." LF

"A PERUVIAN FUND
KNOWS A LOT MORE
ABOUT THE CHILEAN
OR COLOMBIAN
MARKET THAN ABOUT
MARKETS IN ASIA,
FOR EXAMPLE. WE
WANT TO BE ABLE
TO TAKE ADVANTAGE
OF THE EXCELLENT
OPPORTUNITIES
FOR INVESTMENT
OUT THERE"


http://www.LATINFINANCE.COM

LatinFinance - May/June 2015

Table of Contents for the Digital Edition of LatinFinance - May/June 2015

Contents
LatinFinance - May/June 2015 - Cover1
LatinFinance - May/June 2015 - Cover2
LatinFinance - May/June 2015 - Contents
LatinFinance - May/June 2015 - 2
LatinFinance - May/June 2015 - 3
LatinFinance - May/June 2015 - 4
LatinFinance - May/June 2015 - 5
LatinFinance - May/June 2015 - 6
LatinFinance - May/June 2015 - 7
LatinFinance - May/June 2015 - 8
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