Biggs on Finance, Economics, and the Stock Market: Barton's Market Chronicles from the Morgan Stanley Years

Section 3E: Latin America

South America for the Nineties

November 26, 1990

One of the great but risky investment opportunities of the 1990s may be in Latin American equities, thanks to the definite possibility of a turn for the better, maybe even the much better, in the fortunes of countries south of the border. Already some good money has been made in Mexico and Chile, and the next round of four-bagger emerging market stories may come not in Eastern Europe or Asia but in countries like Argentina, Venezuela, and Brazil. After huge gains in previous years, the Mexican market is up 53 percent this year, and Chile is ahead 15 percent. These results demonstrate not only the potential in South America when things begin to go right but also an auspicious lack of correlation with what is going on in the major markets of the world.

South America has many troubles. Inflation is at epidemic proportions in many countries, politics are chaotic, poverty is widespread, the foreign debt is huge, and the developing U.S. recession will damage the region's fragile economies at a crucial moment. Nevertheless, most South American countries are implementing free market policies that have worked so well elsewhere: deregulation, opening the domestic economy, privatization, and reducing the size and scope of government. It doesn't really matter whether the party in power is conservative or liberal, authoritarian ...