Mexico's stock exchange plans to be connected to bourses in Chile, Colombia and Peru by year-end through the Latin American Integrated Market, or MILA, nearly doubling the size of the bloc, it was announced in Mexico City.
MILA was formed in 2011 to boost market liquidity within the Pacific Alliance trade grouping, and the tie-up aims to create more business for the financial markets in the region.
The Pacific Alliance will have in MILA's bourses an effective instrument of economic integration, said Luis Tellez, head of Mexico's bourse.
At the end of last year, the combined valued of the four countries' stock exchanges was 1.1 trillion, Tellez said. According to the World Federation of Exchanges, Mexico's stock market is nearly as big as those of the three Andean countries combined.
MILA works, for example, by allowing a Colombian investor to buy shares in a Peruvian-listed firm using a broker in Bogota.
Countries maintain regulatory authority over their respective trading, but the ability to make the cross-border purchases increases volumes, a key component to attracting future stock listings by companies inside and outside of the region.
Experts say MILA should create a virtuous circle by lowering exchange costs, raising analyst coverage and clearing a path for investment to head to smaller companies.
The S&P MILA 40 index, which tracks the top 40 issues from the three Andean exchanges, is up more than 4% so far this year, while Mexico's IPC index has gained just 0.5%.
The announcement came as a Pacific Alliance summit kicked off in the western Mexican coastal state of Nayarit, near the beach resort of Puerto Vallarta.