Peru ETF (EPU) launched Monday, June 22

Peru’s first exchange traded fund, MSCI All Peru Capped Index Fund (EPU), started trading yesterday, Monday June 22, 2009.

Seeking Alpha Reports:

The iShares MSCI All Peru Capped Index Fund (EPU) will allow US investors to easily access one of Latin America’s hottest markets by tracking a pure free float market cap weighted index. Its 25 names are heavily concentrated in the materials sector (65%), with a particular focus on gold, silver, and copper. Its largest holding at 19% Cia De Minas Buenaventur (BVN) who produced nearly half a million ounces of gold last year (compared to Goldcorp’s 2.4), and its second largest at 15% is Southern Copper (PCU), the biggest player in the world’s fourth largest copper producing nation.

The fund also holds an 11% weighting in Credicorp (BAP) – Peru’s largest financial firm with operations in commercial banking, insurance, and investment banking – whose shares have held up well during the crisis, and several smaller miners with operations in lead, zinc, and iron.
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Now then… it is time for a few “million dollar questions.

a) Does this ETF facilitate investment in Peruvian equities for international investors?
Yes, as one of the world’s best performing benchmarks of the year, loaded with companies seeing gains of well over 60-70% from the beginning of 2009, it will indeed offer investors a way to tap into these companies not listed via ADR’s or OTC.

b) Does this ETF accurately track a Peruvian benchmark , like the Lima General Index?
Time will tell. ETF’s always claim that they do, but I won’t fully believe it until I see hard data supporting such. This ETF does not track Peru’s Lima General Index, but rather MSCI All Peru Capped Index. Click here to access a PDF that explains the methodology behind MSCI All Peru Capped Index.

c) Is now the right time to invest?

Here are some factors to consider when doing your own due diligence:

• Markets around the world are down and it seems the downward trends in recent markets might continue throughout the summer months.

• Copper, gold and silver have already had pretty amazing run ups in recent months and are Peru’s crown jewels of commodity exports (yes there are others like zinc, but lets emphasize these major Peruvian money makers for the time being).

• Volatility due to the political risk associated with the upcoming Peruvian elections in 2011 which pit two extreme candidates of the left and right against one another. Ollanta Humala, the left-wing buddy of Chavez and Keiko Fujimori, right wing, daughter of former president & dictator Alberto Fujimori.

• Recent political unrest in the Amazon region which only calmed down after heated disputes between the government and indigenous protesters lead the deaths of many Peruvian police officers and the massacre of protesters, forced to rely on wooden spears to defend themselves against high powered weapons. *** Note, this is the opinion of this sites humble and open minded Peruvian-American blogger, who can trace his ancestry on his maternal grandfathers side back to the amazon provinces of San Martin and Amazonas, Peru.

• Perceived instability (political and financial) as a result of plummiting approval ratings of President Alan Garcia, who was instrumental is creating the climate for the recent protests in the Amazon–contrary to the popular belief of those who believe his propaganda. Garcia’s administration loves to blame Hugo Chavez and Evo Morales for everything wrong with Peru and as crazy as it might be, it is a great deal like Ahmadinejad in Iran who blames the West whenever something goes wrong.

I have used this statement from Iran’s state television station about the protests occurring right now to articulate my point.

“At least 10 people were killed in the latest unrest to shake Tehran (Bagua), state television said on Sunday as Iranian leaders (President Garcia’s administration) took aim at Western “meddling” (Hugo Chavez and Evo Morales “meddling”) in the post-election tumult (Peruvian Amazon Region) that has triggered the worst crisis since the Islamic revolution (the worst political unrest in his Presidential Term).

Invest wisely my friends! More to come on this topic at the end of the week.

Analysis by Benito

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The only fundamentals improving are commodities

Jim Rogers makes an real life appearance on CNBC and talks to the masses of finance news junkies in the United States.

CNBC’s website is bombarding readers with articles about this Jimmy Rogers interview. If you follow this site, or if you happen to keep your eyes and ears open for Jimmy Rogers in your daily information news sessions, you know he really is not saying anything he hasn’t said before.

Basic conclusion – when the reality of printing so much cash catches up with the major economies of the world, people are going to realize their stock gains are in worthless, debased currencies. When this happens, hard assets and the companies producing them will flourish. Demand for copper and steel are not going to disappear, but is just may greatly diminish for U.S. Bonds and Dollar assets if hyper inflation hits.

Get the picture?

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Jim Rogers: Profit from commodities, currencies and bonds in times of crisis

Can’t seem to find part 2. Rogers covers his general view of where markets currently are and where he’s putting his money right now.

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Weekend Newswire: Latin America

OAS can’t agree on Cuba, while Havana ridicules the organization
The task force created by the Organization of American States, OAS, in an attempt to bridge different members’ proposals to consider the readmission of Cuba seems to have stalled with the main actors clearly underlining their stance.

Colombia Cuts Benchmark Lending Rate to Record Low 5% to Stimulate Growth
Colombia’s central bank cut its benchmark interest rate to a record today and signaled it’s ready to lower it further in an effort to ward off an extended recession as inflation eases

Braskem Taps Peru, Venezuela in $3.6 Billion Expansion Outside of Brazil
Braskem SA, Latin America’s largest petrochemicals producer, plans to invest $2.5 billion in a polyethylene plant in Peru, said Cleantho de Paiva Leite, Braskem’s director of international projects.

Sao Paulo-based Braskem, which holds a 50 percent share of Brazil’s resins market, also is working on engineering studies for a $1.1 billion petrochemical plant in Venezuela with state- owned Pequiven SA, de Paiva said in an interview in Lima.

Venezuela Expropriations: Chávez Talks Himself into Trouble with Argentina’s Fernández de Kirchner
The spark for the conversation sought by Fernández de Kirchner was a remark Chávez is reported to have made in private to Brazilian President Inacio Lula da Silva. That remark, it’s said, was to the effect that Venezuela was on course to take over foreign companies except for Brazilian ones.

President Hugo Chávez’ strategy of nationalizing companies including foreign ones, and a remark he did or did not make in seriousness to Brazilian President Ignacio Lula da Silva, appear to have posed problems for him and his Argentine friend and colleague, Cristina Fernández de Kirchner.

Chávez has depicted Fernández de Kirchner as an ally and soulmate in his bid to build a regional alliance to counter what he sees as the undue influence and power of the United States in Latin America. But his peremptory takeover of steelmaker Sidor and his tendency to talk off the top of his head may well have put her in between the proverbial rock and a hard place at home.

Argentina May Be Sanctioned By Manhattan Judge in Bondholder Litigation
Argentina may be sanctioned for failing to comply with a U.S. court order to turn over to bondholders documents regarding its pension funds, a federal judge in Manhattan said.

U.S. District Judge Thomas Griesa ruled in October that Argentine pension funds nationalized by that country’s government and held in the U.S. may be used to satisfy bondholder judgments against the republic. Argentina has appealed. Griesa later ordered the South American nation to turn over documents related to its pension funds to bondholders.

Argentina’s Construction Activity Declined 5.5% in April From Year Earlier
Argentine construction activity fell the most in five months in April, as Argentines delayed investment plans amid the global financial crisis and political concern ahead of next month’s mid-term elections.

Mexico GDP to Sink Most Since 1932 in Fall `Hard to Fathom,’ Goldman Says
Mexico’s economy will contract this year by the most since 1932 as a slump in the U.S. curbs demand for exports and slows dollar flows from tourism and remittances, Goldman Sachs Group Inc. said.

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Corporacion Andina de Fomento Sells $1 Billion of 10-Year Notes

Corporacion Andina de Fomento sold $1 billion of 10-year notes, according to a person familiar with the transaction.

CAF sold the bonds to yield 4.5 percentage points above U.S. Treasuries, said the person, who declined to be identified.

[Source] — Bloomberg

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Ecuador Pays 35 Cents for Defaulted Bonds in Buyback

Ecuador paid 35 cents on the dollar to holders of as much as $3.2 billion of defaulted bonds and gave creditors a second chance to sell back their securities.

The payout is 5 cents more than the minimum price set by the government and the 30-cent payout offered by Argentina in its 2005 debt restructuring. Ecuador didn’t say how many investors participated in the buyback.

The government, seeking to pressure bondholders into participating, said it won’t improve the offer to those creditors who hold out of the buyback auctions. President Rafael Correa halted payments in December on $510 million of 2012 bonds and in March on $2.7 billion of 2030 bonds, saying the securities were “illegitimate” and “illegal.” A drop in oil exports has sparked a tumble in Ecuador’s reserves.

The repurchase prices “reflect the resources of the republic and are responsive to the majority of the offers received,” Finance Minister Maria Elsa Viteri said in a statement. “The republic will not offer equal or more favorable terms to those being offered to holders of bonds presently.”

Ecuador’s stance is similar to that of Argentina after its 2005 debt settlement. Creditors holding $20 billion of the bonds Argentina defaulted on in 2001 rejected the government’s offer of about 30 cents on the dollar. Then-President Nestor Kirchner pushed legislation through congress that blocks the government from making a second offer to creditors.

Click here to access the full article from Bloomberg

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