Figures from the International Monetary Fund predict that annual growth in the region will be about 5 per cent until the year 2000, compared with 3 per cent in Europe and 7 per cent in the Pacific rim.
Over the next few weeks three trusts investing in the region are being launched. The funds from Templeton, Edinburgh Fund Managers and Morgan Grenfell all aim for long-term capital growth. Morgan Grenfell's fund has already raised pounds 53m from institutions. The public offer closes on 23 March.
The launches coincide with the implementation of the first stage of the North American Free Trade Agreement on 1 January, which aims to phase out trade barriers between the countries of South America and the United States over 15 years.
Nafta will create a free trade zone of 370 million consumers, which will boost many aspects of the economy. Cheap labour costs - a factory worker in Mexico earns about pounds 100 a month compared with pounds 1,200 in the US - will lead to the relocation of factories.
Transfer of technology, from the US in particular but also from Europe and Japan, is accelerating. This in turn will create greater wealth in the economies and greater domestic demand.
Dr Mark Mobius, Templeton Investment Management investment director, said there were not many regional Latin American funds: 'By comparison with the Far East, it's neglected. There is no reason to believe that Latin America will not achieve the same growth rates that the Far East has.'
But what of the risks? Just four years ago inflation, for instance in Argentina, was careering out of control at 5,000 per cent - it is now about 6 per cent. In general, inflation has been kept under control by linking currencies to the US dollar. Alan Nesbit, fund manager at Morgan Grenfell, said: 'With the exception of Brazil, inflation in the region has been reined in.'
Political instability, however, continues to be a threat to market stability. For example, when Fernando Collor de Mello, President of Brazil, became embroiled in a corruption scandal that eventually led to his impeachment, the effect on the market was catastrophic. It fell by 60 per cent. Investors feared that his replacement, Itamar Franco, would not continue with economic reforms, which included a big privatisation programme. Since then the market has recovered.
Mr Nesbit said: 'Franco has learnt not to interfere and to embrace the privatisation programme. The country needs to privatise to reduce its vast deficit.' Scott Smith, fund manager at Edinburgh Fund Managers, noted that political uncertainty was likely to increase this year as general elections are to be held in Mexico and Brazil. 'The risk is if more left-wing governments get voted in there may be a change in economic policy.' He added that some of the changes introduced in Mexico would be very difficult to reverse because they were entrenched in the constitution.
Morgan Grenfell is on 071-256 7500, the mini prospectus is available on 0800 317773. Edinburgh Fund Managers is on 031 313 1000. Templeton is on 031 469 4000.
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