Barclays Global Investors expects its exchange-traded funds business in Brazil to reach $1 billion to $2 billion in the next year.

The forecast follows the introduction of the first three BGI iShares ETFs for the Brazilian market last week (see story here.)

The iShares ETFs were the first ETFs approved by the Brazilian regulator, the Comissão de Valores Mobiliários, a process that BGI began planning three years ago. More ETF companies may now follow iShares' lead into Brazil, where hedge funds and institutional use of ETFs is expected to lead the adoption of ETFs by local investors.  

In most Latin American ETF markets, it has been institutions leading the way, and retail investor use of ETFs expected to be a much longer-term story.

Mexico and Chile are among the easiest markets in Latin America to introduce ETFs, and these are the markets where BGI's early Latin American success has been concentrated. BGI has approximately $13 billion in Latin American ETF assets.

BGI brought the iShares to Mexico in November 2007, where ETF companies are allowed to directly cross-list existing ETFs on the Bolsa de Valores.

The Mexican-listed iShares have $1.3 billion in volume, according BGI. The company currently manages 94 cross-listed and four locally listed iShares ETFs in Mexico. BGI expects that as it targets more retail investors in Mexico, it may tilt its future ETF development to local listings in Mexico.

The company has more than 100 iShares available to pension plans and mutual funds in Chile and Peru.

In Chile, ETF sponsors are required to register ETFs with the local financial authorities, but the ETFs do not have to be listed on a local exchange. That ease of introduction allowed Barclays to quickly climb the ranks of foreign investments used by pension fund managers in Chile, to the No. 1 position this year (see story here).  

In fact, success in Chile has led BGI to consider opening an office for iShares in Santiago in 2009.

State Street Global Advisors is also planning to significantly expand its ETF offerings in Chile, as it only offers the SPDR S&P 500 (NYSE Arca: SPY) currently.

BGI's existing iShares offices for Latin America are in Mexico City and Sao Paolo, Brazil.