Sovereign Wealth Funds are more fashionable than ever. In Latin America, some countries – Chile, Trinidad and Tobago and Venezuela – have had theirs for some time. Brazil – with reserves of over $250bn – joined them last year. In 2011 Peru, Colombia, Panama and Bolivia took moves towards creating their own.
All these countries have abundant reserves and face the challenge – the Andean countries in particular – of managing the raw materials boom. Their investments and exports are highly concentrated in sectors offering little value added or job creation. Hence their desire to use their present abundance to take a leap forward in production and diversify their economies, an issue that remains pending. Sovereign wealth funds may be strategic vehicles to this end – as long as the institutions are nurtured by first-rate professionals and processes.
This is precisely what was masterfully achieved by Chile.