Peru, Colombia, and Chile merge stock markets

Peru, Colombia, and Chile will formally merge their stock markets Monday, creating the second-largest bourse in Latin America after Brazil and promising to increase liquidity in the mineral-rich Andean region.

The market alliance of the three right-leaning nations spanning most of South America's Pacific coast gives investors better exposure to assets linked to the region’s natural resources and its rising middle class. And coupled with their recently announced plans with Mexico to form an economic bloc called the Area of In-depth Integration, the stock market merger creates a political foil to the Bolivarian Alliance of regional leftist governments led by Venezuelan President Hugo Chávez.

“There's a clear difference in policy organization in this group of countries,” says economic analyst Sebastian Guevara of Apoyo Consultaría, a Lima-based research company. “There's a conscious effort to encourage integration between these like-minded countries.”

Special significance for Peru

The launch of the regional bourse, dubbed the Mercado Integrado Latino Americano (MILA), has special significance here in Peru, coming days ahead of a presidential run-off that pits right-leaning Keiko Fujimori against left-leaning Ollanta Humala, who has in the past campaigned with Mr. Chávez.

Think you know South America? Take our geography quiz.

Although the Lima stock exchange represents the smallest share of MILA, this nation has the potential to dictate its success in the coming months.

Victory for Mr. Humala in the election “could pose obstacles to the merger of the [stock] exchanges,” says Mr. Guevara, adding that the former Army captain has shown hostility toward foreign investors and proposed government controls over corporate mergers.

Concerns about Peru's vote

Indeed, the Lima stock exchange plunged in April when Humala won the first round of voting, but it soared May 26 when Lima-based polling firm Datum showed Ms. Fujimori now leading with 52.9 percent support.

The daughter of imprisoned former President Alberto Fujimori is backed by much of the business community, recently gaining a big endorsement from third-place presidential candidate and former Finance Minister Pedro Pablo Kuczynski.

Her steady rise in the polls in part reflects the nation's desire to see a continuation of the prudent fiscal policies and pro-market initiatives – such as the launch of the MILA – that helped fuel 8.8 percent economic growth in 2010, the highest in a region of hot economies.

1 | 2

Next