All eyes on Latin America.

Though Latin America is reeling in the wake of the Mexican debt crisis, the political situation provides cause for optimism. In democratic elections, countries have voiced support for moderate leadership and opted to continue the economic remodeling begun in the 1980s. Radical populism and state-oriented military governments appear to be history. Confounding pessimists, the social costs of economic change have prompted neither a rejection of democracy nor the return of extremist politicians.

Overall, the direction is clear: In Mexico, Brazil, Colombia, Argentina, and Chile, liberalization and privatization are combining to create attractive new business opportunities. Pragmatic decision makers continue to seek ways to attract new investment. Governments have spent heavily on social programs, leveraging them to offset the economic dislocation of reform. Except in laggard Venezuela, the approach is working to ensure stability.

In Colombia, the government of President Ernesto Samper will push for investment in housing, health, and primary education. Samper will be aided by the oil bonanza he inherits from the Cusiana oil field on the edge of the Eastern Cordillera hills. By 1998, Colombia's oil exports could be worth $4.5 billion a year - several times that of coffee.

Colombia is privatizing its seaports and six busiest airfields. It is negotiating contracts with private companies for the construction and operation of $3 billion in power plants and $1.5 billion in highways. Some of their toll roads will be built by Mexican, Spanish, Italian, and Brazilian companies.

Brazil's President Fernando Henrique Cardoso seeks to distribute resources more effectively and streamline the delivery of services. He plans to unveil a four-year, $100 billion infrastructure program, half of which will be privately financed. He also hopes Brazil's Congress will approve a concessions bill, intended to speed foreign investment in electricity generation.

Brazil's steel industry, the biggest in Latin America, has doubled in productivity since 1990, attaining annual production per worker close to Japanese levels. At Caterpillar's subsidiary, a $300 million investment has cut the assembly time for a tractor to just three days. Mexico, the biggest market for U.S. goods south of the border, continues to attract attention. Despite the headlines created by the incident in Chiapas and the assassination of the PRI's presidential candidate, political risk remains low. One reason: President Ernesto Zedillo supports social investment policies launched by former President Carlos Salinas de Gortari. One of these, the Solidarity program, emphasizes grass-roots investment, empowering rural areas to participate in community planning. While the recent devaluation of the peso sent shock waves through global financial markets and neighboring economies, the long-run benefits may offset the initial jolt if President Zedillo remains committed to fiscal austerity. Interestingly, the debt crisis may accelerate privatization in Mexico as the country's leaders seek strategies to attract additional investment. In a future issue, "Market Horizons" will focus exclusively on problems in the Mexican market.

Across the region, the roster of projects and investments continues to grow. Last August, the United States Overseas Private Investment Corp. announced it would provide Tenneco with $200 million in financing and $200 million in insurance for the construction of a gas pipeline between Argentina and Chile in 1995. As regional integration proceeds apace, Brahma S.A., Brazil's biggest brewer, has purchased large breweries in Argentina and Brazil to become the major player in those markets. GM plans to invest $500 million to build a third plant in Brazil.

In addition to all of their national efforts, many Latin American countries also have spurred economic growth by forging cross-border agreements. In 1991, Argentina, Brazil, Paraguay, and Uruguay formed the free-trade bloc Mercosur; Colombia, Ecuador, Peru, and Venezuela banded together, signing the comparable Andean Pact. The benefits to member countries have enhanced the optimism - surrounding and opportunities for - outside investment. Ultimately, these miniblocs may converge with other regional trading zones, such as that represented by NAFTA. In fact, NAFTA participants recently announced plans to expand the agreement to all countries in the hemisphere within the decade.

Democratic leaders continue to make tough economic decisions. Old models are discredited. Politicians are taking steps to ensure that the needs of the economically disadvantaged are being addressed. Taken as a whole, for both new and old investors, this is the best news to emerge from the region in decades.

Riordan Roett is the senior political analyst on international capital markets at Chase Manhattan Bank in New York and director of the Latin American Studies Program at the School of Advanced International Studies, Johns Hopkins University, in Washington.