Peru’s economy is expected to grow about 5 percent this year, the lowest rate in a decade. But the stabilizing commodities environment is leading economists to expect a rebound next year. Economists at Credit Suisse anticipate 6 percent growth in 2014.

Still, many investors have simply chosen to ignore the prospects for a 2014 rebound in emerging market economies. “It’s just become easier to make money in developed markets,” says Russ Koesterich, chief investment strategist at BlackRock.

Koesterich believes a transition is underway that will make emerging markets less vulnerable to China-related perceptions in the future. “China is rebalancing more towards domestic consumption, and commodity prices are re-setting to reflect that view,” he says. “There’s a very good long-term growth story [among the Andean economies of Chile, Colombia and Peru], but for now the commodity overhang is still perceived as a problem.”

Andean Exposure

The iShares MSCI All Peru Capped ETF (EPU) is currently the only fund focused solely on this Andean nation. The fund’s 31 percent year-to-date decline has brought shares back to levels seen in late 2010, even though Peru’s economy has grown more than 20 percent since then.

For sure, a 48 percent weighting in mining companies has distorted this fund’s performance, but as the rest of the Peruvian economy grows, mining stocks should comprise a smaller portion of this ETF. “The fund evolves as the MSCI index which underpins it also evolves when new issues come into the market,” says Jennifer Hsui, portfolio manager at iShares, the ETF unit of BlackRock.

BlackRock’s Landers sees that as a crucial evolution for global investors looking at Andean stocks. “All these markets suffer from liquidity issues,” he says, adding that “more issuance would be welcome to allow for the equity market to better reflect economic activity.”

This Peruvian ETF carries an expense ratio of 0.61 percent, and though it had nearly doubled in value in the first 18 months from its launch in June, 2009, the sharp slump in 2013 has reduced the annualized gain to about 8 percent. Looked at another way, this ETF has underperformed the S&P 500 by roughly 60 percentage points over the past two years.

Though Peru’s population of 30 million is roughly twice the size of neighboring Chile, it’s the Chilean economy  that drives the Andean region: its GDP per capital of US$22,000 is the highest in South America, fueled by a vast consumer class.

And that middle-class heft is nicely represented in the iShares MSCI Chile Capped (ECH), with a roughly 20 percent weighting each in consumer cyclical stocks, financial services, utilities and industrial stocks. Still, that broad-based exposure hasn’t helped this ETF avoid the regional downdraft––it’s down 25 percent thus far in 2013, and it sank to a 52-week low earlier this week.