For investors in search of growth in 2013, one of the best places to look is in emerging markets, particularly in the often-neglected region of Latin America.
While most of the talk about investing in emerging markets over the past several years has focused on Asia, particularly China and India, Latin America has been quietly enjoying a nice little boom of its own.
The International Monetary Fund (IMF) projects economic growth in Latin America at 3.2% for 2012 and 3.9% in 2013, compared with growth in the United States of just 2.2% in 2012 and 2.1% in 2013.
But several of the emerging markets of Latin America should perform much better than the regional average.
For example, the IMF estimates the gross domestic product (GDP) of both Chile and Colombia will grow 4.5% in 2013, while Peru's GDP will rise 5.8%, Panama's 7.5% and Paraguay's an eye-popping 11%.
Investors in search of growth clearly need to consider the emerging markets in Latin America.
"Latin America as a whole has averaged 4% real growth in the last decade, far more than you would have gotten in Europe, North America or even much of Asia outside of China and India," said Money Morning Global Investing Strategist Martin Hutchinson.
Still, investors need to research the region before going shopping. Not every Latin American country is a winner.
"The region remains a minefield for investors," Hutchinson said, noting that many of its governments are left-leaning and prone to policies that hurt business.
The Wall Street Journal recently described the emerging markets of Latin America as "a tale of two economies" with the philosophy of the political leadership determining which is which.
"The global slowdown of the past two years has created a divide in the region between countries that pushed a more aggressive free-market agenda and kept a tighter grip on the public purse and those that used the swell in coffers from rising commodity prices to embrace a bigger role for government in the economy," the Journal said.
The key to investing in the emerging markets of Latin America in 2013, then, is looking at the countries' government policies to sort out which are the darlings and which are the dogs.
Lucky for you, we already did the research...
First, here are the countries you want to avoid:
These emerging markets in Latin America tend to have governments pursuing free-market economic policies:
Somewhat more cautious investors who want to add Latin America emerging markets to their portfolios may want to use broader-based ETFs.
Two ETFs that cover the Latin America emerging markets in general are the iShares S&P Latin America 40 Index (NYSE: ILF) and the SPDR S&P Emerging Latin America ETF (NYSE: GML).
For more investing ideas from Martin Hutchinson, including how to play other emerging markets, click here.
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