March 4, 2010 | Wall Street Journal

Colombia, Peru and Chile have begun a process of linking their stock exchanges. The aim is creating an integrated market representing about 21% of Latin American stocks by capitalization by the end of 2011.

The integration will give companies in the three countries better access to capital and help investors to spread risk, said Amanda Mago, vice-chief financial officer of the Colombian stock exchange, in a presentation in Bogota on Thursday.

"The Colombian stock market is very strong in infrastructure and energy stocks, whereas in Peru 55% of the market is mining companies," Mago said. "That's what I mean by diversifying risk. The three markets complement each other."

The three exchanges hope to complete the first phase of integration by the end of this year, when brokerages in the three countries will be able to trade in each others' markets via local intermediaries.  Under the second phase, planned to be completed by the end of 2011, brokers will be able to trade in all three markets directly.  "There is a lot of cross-investment [involving] the three countries," Mago said.

Some Colombian brokers believe integration could still be a ways off.  "This is a good thing if it works fully, but the politics of each exchange may yet get in the way of a full integration," said Rupert Stebbings, an analyst with Colombia's largest brokerage Interbolsa.  Johanna Castro, an analyst with Colombian brokerage Corredores Asociados, said that integration would take place when the three countries have harmonized their regulations.

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