Best Stocks to Buy in South America

When investors think of Latin American stocks to buy, they usually first think of Brazil.

Brazil is the largest country in South America and is part of the BRICs group of emerging nations that were once thought to be the world's premier growth opportunities.

While many think that Brazil will eventually get its act together and resume a path of economic growth, right now financial conditions there are far from robust. The economy is very weak, and the nation is experiencing inflation that is leading to political turmoil.

The country's close trading ties to Venezuela and Argentina are becoming problematic as oppressive governments in those nations have choked off their own economies.

The outcome of the 2014 election could be a turning point for Brazil, but Brazil is not the region's growth story right now.

Investors' focus in Latin America should instead center on the Pacific Alliance created back in May between Chile, Mexico, Colombia, and Peru. The four nations removed tariffs on 90% of trade between themselves and established plans to remove the balance over the next decade.

Chile and Peru have combined their stock exchanges to create a single regional exchange, and Mexico is expected to integrate its stock exchange in 2014. Panama and Costa Rica have expressed some interest in joining the alliance in the future.

The four founding nations of the Pacific Alliance have faster gross domestic product (GDP) growth, export more goods, and are attracting more foreign investment than Brazil right now, so they should be of more interest to emerging market investors.

Looking at the countries in the partnership, one stands out as the best bet for emerging market growth investors right now.

Why Chile Holds South America's Best Stocks to Buy Now

Chile is one of the strongest economies in South America.

The country has the highest GDP per capita on the continent and is the most competitive nation in the region, with several industries forming the backbone of its economy.

Chile is the world's largest copper producer and also provides more than one-third of the world's supply of salmon. And Chile's forestry sector has flourished as well and is one of the region's largest exporters.

Financial services and banking laws have relaxed over the past decade, and financial services are growing. The national pension system has created a valuable source of investment capital to spur growth in Chile as well.

Chile's economy is growing at a much faster rate than most of the rest of the world. The Chilean central bank said last week that GDP grew by 5.5% year over year, driven by a large increase in domestic demand. Activity picked up across all sectors, including such important industries as retail construction and services. Mining also continues to be a strong contributor to the economy in spite of weakness in the metals markets, including copper.

Emerging market investors might want to consider compiling a selection of Chilean stocks to take advantage of what should be an even stronger economy, as the Pacific Alliance continues to open markets and expand trade. The recent weakness across the board in emerging market stocks is creating a more favorable entry point, especially for large cap stocks based in Chile.

Here are three of the best stocks to buy now to play this growth story...

Tim Melvin

About the Author

Browse Tim's articles | View Tim's research services

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

… Read full bio