12 Latin Investments to Spice Up Your Portfolio

By James K. Glassman

The most unlikely part of the world to thrive in the aftermath of the global financial crisis might be Latin America, a region with a vivid history of economic mismanagement and corruption. Yet, although risks always lurk in this part of the world, Latin American economies and stock markets have outpaced those of Europe and the U.S. in recent years, and prospects for investors are excellent.

An exchange-traded fund that holds shares of the largest companies in the region, iShares S&P Latin America 40 Index (symbol ILF), returned an annualized 21.7% over the past five years through July 9. (By contrast, the main U.S. benchmark, Standard & Poor's 500-stock index, lost 0.2% annualized.) What's remarkable is that, despite the huge run-up in Latin American share prices, many strong companies in the region are trading at price-earnings ratios in the low teens and less.

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What underlies rising stock prices is strong economic growth. Take Peru, a nation known until fairly recently for poverty, terrorism and incompetent governments. After growing at a brisk 9% in 2007 and 10% in 2008, gross domestic product slowed in 2009, although it still inched ahead by a percentage point. The economy is expected to grow by 6% this year. Inflation remains tame, and the unemployment rate is a good deal lower than in the U.S.

Peru impressed me during a recent visit with its political stability and entrepreneurial spirit, and it's not alone in the region. The consensus of economists, as reported by The Economist, is that the average GDP of Argentina, Brazil, Chile, Colombia, Mexico and Peru will rise 4.8% in 2010, compared with 3.3% in the U.S., 2.7% in Japan and 1.1% in euro-zone countries. (more)