- Editorial Market Commentary -

January 11, 2010 (FinancialWire) (Investrend Forums Syndicate) (By Paul Lengeman) — In aggregate, both the iShares S&P Latin America 40 ETF (NYSE: ILF) and the SPDR S&P Emerging Latin America ETF (NYSE: GML) have climbed steadily upward since March of last year. Recent developments relative to the Venezuelan bolivar, which may have an impact on that trend, prompted the following commentary from FinancialWire(tm) contributor, Paul Lengeman:

It’s the Beginning of the End for President Chavez.

Venezuela’s bolivar (VEB) was devalued over the weekend by some 40%. The new bolivar fuerte was set at VEB 4.3:USD1.0 up from VEB 2.6:USD1.0.

This virtual halving of the official exchange rate against the dollar is not a good thing for the country. Although it will double the local value of Venezuela’s oil sales abroad, it will also massively increase inflation. The rate of local monetary erosion is around 22%. That undoubtedly will accelerate dramatically.

Moreover, the black market value of the bolivar will now begin to soar. What the rate of exchange will be is not clear at the moment, but we will find out soon.

Those who are old enough should remember what happened in Chile when President Salvadore Allende, in September, 1973, was ousted in a coup after driving his country’s economy into hyper-inflation and virtual economic stand-still.

Something along those lines will also happen in Venezuela, especially if oil prices continue to stagnate or decline.

The process of deterioration will follow the familiar pattern of increasing food shortages, massive strikes and ultimately a military coup by right-wing officers tired of not getting paid. Chavez has warned against price gouging and profiteering, but nothing will help this ersatz communist misfit.

This is only the first chapter of the demise of Hugo Chavez.

Source: FinVidea Weblogs (http://www.fxlivetv.net/fxlive-articles.php?Entry=501)

The iShares S&P Latin America 40 ETF investment seeks results that correspond closely to the performance, before fees and expenses, of the S&P Latin America 40 index. The fund invests at least 90% of assets in securities of the Underlying index and in depositary receipts representing securities of the Underlying index. The Underlying index is comprised of selected equities trading on the exchanges of five Latin American countries. It includes highly-liquid securities from major economic sectors of the Mexican and South American equity markets. The fund is nondiversified.

The SPDR S&P Emerging Latin America ETF seeks to replicate as closely as possible, before fees and expenses, the total return performance of an equity index based upon the Latin American equity markets. The fund uses a passive management strategy to track the total return performance of S&P/Citigroup BMI Latin America index. The index is a market capitalization weighted index that defines and measures the investable universe of publicly traded companies domiciled in emerging Latin America markets. It consists of companies from Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. The fund is nondiversified.

Paul Lengeman is president and CEO of FinVidea, and contributes regularly to FinVidea’s weblog. To contact Mr. Lengeman and/or to get a free trial subscription to all of FinVidea’s live video and weblog content, go to Investrend Syndications’ dedicated FinVidea webpage (http://www.investrend.com/finvidea).

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