I picked up this idea from a weekend house guest who opined that the emerging markets would be major beneficiaries of the more economically developed world's mass of bail-out programs. We were discussing South America primarily and the discussion revolved around the idea that the economies of places like Brazil, Argentina and Chile were still in pretty good shape and the huge amounts of dollars flowing into the northern hemisphere's economies would pretty quickly work their way south in the form of increased commodity exports at higher prices. I like to study the South American stock markets and companies so I thought I would take a look at how they are doing and profile a couple of stocks I keep an eye on.

First, as proxy for the emerging markets in general let us take a look at the iShares MSCI Emerging Market Index ETF, NYSE:EEM. EEM closed out 2008 at $24.97 and closed on Friday at $27.95. That is a gain of 11.9% year-to-date. Over the same period of time the S&P 500 has lost 5.2% of its value.

Let us see how Latin and South America have faired by also taking a look at some ETFs. The iShares S&P Latin America 40, NYSE:ILF, gives a broad exposure to the region and is up 17.1% from where it closed out 2008. For the individual South American markets that have ETFs here are the returns: iShares MSCI Chile, NYSE:ECH, up 21.2%. Argentina does not have an ETF but the Merval has gained 7.8%. The iShares MSCI Brazil Index, NYSE:EWZ, is up 27.8% year to date. I like looking at and using ETFs for foreign market information because they automatically take into account currency fluctuations and show what your returns would be in U.S. dollars.

Even though these funds have show some excellent returns over the last 3+ months, they are still trading at around 50% of last years highs. According to Yahoo Finance the PE of EWZ is still just 7.75. I see a lot of upside potential in the stock markets of these countries. Note: I find Argentina to be a scary place, financially. Brazil and Chile offer many interesting investment possibilities, so I would steer clear of most thing Argentinian.

I also said I would give out some individual stocks from the region that I follow. Here are a few that I think have excellent prospects:

Copa Holdings SA (NYSE:CPA). Panama based airline is very profitable and growing in Latin America.

Banco Latinoamericano de Exportaciones SA (NYSE: BLX) Better known as Bladex, this Panama based bank has seen its competition in trade financing decimated by the financial crisis. BLX is in a strong financial position.

Companhia Siderurgica Nacional (NYSE: SID) Brazilian steel maker is vertically integrated and hugely profitable. Sells 80% of their steel in Brazil.

Ultrapetrol (Bahamas) Limited (NASDAQ: ULTR) Small cap shipping company hauls agricultural products out of Paraguay and Argentina by barge. Also dry bulk shipping around South America. Very speculative, but very interesting.

Remember, the South American economies are very dependent on commodity prices and the stock markets there are either leading indicators or getting ahead of themselves. The stocks I have listed are ones I find interesting but do your own very deep research before considering any investing.