United States stocks have been suffering this year, while the Latin American market is up more then 50%, according to CNNMoney.com.
This trend of high returns continues from 2003, when returns exceeded 60%, and from 2004 when returns were up almost 40%.
The success of Latin America can be attributed to oil, and the subsequent rise in energy prices has had a positive effect on the economies of Brazil and Argentina as well.
According to a study done by Thomson/Baseline, the best Latin American-based American Depository Receipts (ADRs) this year, reportedly, are energy companies.
For example, the shares of Argentine Oil Company are up by 32%, and Brazil's Petrobras has shot up to nearly 70%.
However, the high returns have many people worried that Latin America will not be as successful next year. The bigger question is whether falling oil prices could cause a recession in Latin American markets.
Experts say that there might not be anything to worry about. After all, says Bruce Zaro of Delta Global Advisers, there are alternatives to oil that make the region a stable place for investing.
"My take on Latin America is that it's more of a basic materials play than oil. Basic materials companies sometimes trade in sympathy with oil but other times they buck the trend and I think they could hold up," Zaro said.
"We remain pretty optimistic about the long-term price of oil and are not expecting it to come down all that much. The emergence of China as a large source of demand for energy suits Latin America well and should reduce the cyclicality that we have traditionally seen there," said Julian Thomson, manager or the RiverSource Emerging Markets Fund, which owns Petrobras.
But not everyone is confident in the Latin American markets.
CreditSights'Christian Stracke, says that there are a lot of factors that point to a slump in the Latin American economy and should be regarded with seriousness. In his article Brazil-When Do we Call it a Recession, Stracke points out to the underperformance of the Brazilian market as compared to earlier projections. He writes that the slowing down of the Brazilian economy might affect other countries, especially Argentina. Another one of Stracke's fears is the 2006 presidential elections in Brazil, Colombia, Ecuador and Peru. The potential changes in policy can spook investors from the delicate region.
"In emerging markets, contagion is a serious problem," Stracke said. "If investors do poorly in one major emerging market country, they often rush to sell assets in other emerging markets whether or not the fundamentals are similar."
Wendell Perkins, manager of the Johnson Family International Value Fund, also believes there is much to gain in the region, especially in cement. Cemex, his pick, has been benefiting greatly from the U.S. highway expansions as well as the reconstructions of the Gulf Coast following the Hurricane Katrina.
In regards to the worry over Brazil, Thompson remarked that Brazil has too many natural resources to recede from the current good economic standing. The country also provides excellent agricultural goods and materials that alone bring amazing profits. Combined with the falling rates that have been forecasted for next year, the Brazilian economy should continue to soar. To prove his confidence, he said that his fund has Brazilian retailer Lojas Renner and two banks, Bradesco and Unibanco, in it.