PLAYING THE REBOUND.

Latin America's hottest investors share their top picks for 2001.

MOST LATIN MUTUAL FUNDS ENJOYED FAT RETURNS THROUGH the start of last year, with a great rebound from the Brazilian devaluation in 1999 and an ongoing expansion in Mexico, plus added zip from the short-lived dot-com rally. Since then, just about everybody has taken lumps. Most folks are happy just to have lost less ground than the overall market.

During these tough times, investors remain focused on the big markets in Brazil and Mexico and on the highly traded stocks--such as Tele Norte Leste and Telefonos de Mexico--because everybody wants to be able to sell if things get even rougher. Especially in Argentina.

"Many people are expecting a crisis in Argentina," says Ernesto Ramos, a partner at Nicholas-Applegate Capital Management, "This is a very good time to be a buyer in the region because the returns are traditionally extraordinarily high after these dips in confidence."

With an eye toward helping readers identify the next big opportunities, LATIN TRADE asked Latin Fund Management and Lipper Analytical Services to compile tables of the fastest growing Latin American and international funds from June 1999 to June 2000. We then asked the fund managers with the hottest hands in Latin America to make their picks for 2001. Here's what they have to say:

BRAZIL

HAYTON PEZZONI

Portfolio Manager

ITAU INSTITUCIONAL ONIX FIA 

167.1% annual return

Fund was created at the end of 1997 when foreigners could only purchase ordinary shares of state-run Petrobras through a fund. With legal changes allowing direct pruchases, the highly successful fund is redefining its mission to include more than Brazil's energy sector. Top picks for 2001 include:

PETROBRAS Management measures to improve margins mean, even if oil prices fall to US$25 per barrel, net income will not be seriously affected. The state-run Brazilian company's joint Ventures with foreign partners have boosted exploration and drilling.

USIMINAS The Brazilian flat steel producer will benefit from the expanding local economy through increased sales to automotive and home appliance industries, plus ships contracts with the Brazilian Navy.

GERDAU The Brazilian government is providing construction industry incentives, the most important of which are an expanding economy and falling interest rates, so this producer of long steel--the kind used in buildings--should be a big winner.

ALONSO PEREZMARTINEZ DUPUI CEO Latin America Invesco Global Asset Management INVESCO LATIN AMERICA TECH & TELECOS 51.9% annual return

ARGENTINA

The fund foresees no big changes in the U.S. economy--a soft landing with medium-term real GDP expansion of about 3% and continued strong productivity growth--and that's good news for Latin America. Top picks for 2001 include:

TELE NORTE LESTE PARTICIPACOES or TELEMAR The fixed-line phone company is looking for an international strategic shareholder. It provides service to 170 million people in about 16 states in the north and east of Brazil, including the states of Minas Gerais and Rio de Janeiro.

BRASIL TELECOM PARTICIPACOES The purchase of southern Brazil's Companhia Riograndese de Telecommunicacoes, the fixed-line phone acquisition from Spain's Telefonica, continues its expansion. The resolution of bickering between main shareholders Telecom Italia and Opportunity should be a catalyst for growth.

GRUPO TELEVISA Mexico's ongoing economic expansion will translate into increased advertising coin for the country's largest media company, which revamped its sales force and hiked rates to maximize the benefit of the coming bonanza.

INTERNATIONAL

THEODORA JAMISON AND ERNESTO RAMOS Investment Analyst and Partner Nicholas-Applegate Capital Management NICHOLAS-APPLEGATE LATIN AMERICA I 42.2% annual return

For the second year running, the fund sits at the top of the international rankings, thanks in no small measure to its ability to select the right companies in the right sectors, such as telecom, media and the Internet. Top picks for 2001 include:

CORPORATION INTERAMERICANA DE ENTRETENIMIENTO (CIE)

An investor favorite since its initial public offering in 1995, the rapidly growing Mexican entertainment company sells tickets for its shows at its venues across Latin America. Its Mexico City racetrack should keep the company's revenues racing along in 2001.

GRUPO FINANCIERO BANAMEX-ACCIVAL (BANACCI) The financial group's bank is back on track: Reserves cover 100% of bad credits, non-performing loans are performing and new lending is underway.

BANCO ITAU The No. 2 Brazilian bank is posting solid returns and aggressively consolidating its position in Brazil. The recent purchase of Banestado gives it a national presence with strong market share in Brazil's five largest states.

MEXICO

CARLOS PERELONGUE

Equity Funds Director

FONDO SANTADER BALANCEADO

31.4% annual return

The fund remains bullish on companies with high trading volumes. Mexico's stable macroeconomic environment and smooth political transition should provide additional profit punch in the years to come. Top picks for 2001 include: TELEFONOS DE MEXICO (TELMEX) The spin-off of its cellular phone subsidiary, America Movil, has great potential, while its fixed-line business enjoys healthy margins. "It's an impressive cash cow."

GRUPO FINANCIERO BANAMEXACCIVAL (BANACCI) The Mexican bank is well positioned for Internet growth, has a good franchise with strong brand recognition and commands strong market share. The institution has squared away bad debt issues with the authorities and is ready to resume lending.

WAL-MART DE MEXICO (WALMEX) The Mexican subsidiary of the U.S. behemoth is doing an extraordinary job, with lots of cash to fund future growth. As part of the world's largest retailer, its economies of scale are starting to weigh on its Mexican competition.

CHILE

FRANCISCO GUZMAN & SERGIO SOTO

Assistant Manager & Investment Manager

SANTANDER MULTINACIONAL

17.1% annual return

The worldwide emerging markets fund turned in Chile's best performance in 1999 and was down considerably less than the overall market in 2000. In 2001, watch for improved investor treatment in Asia--a possible rally catalyst--and easing U.S. interest rates to boost Latin America, specifically Brazil. Top picks for 2001 include:

TELE CENTRO SUL The fixed-line phone company in southern Brazil should emerge strong from its recent merger with Companhia Riograndese de Telecomunicacoes (CRT), as well as from the expanding Brazilian economy.

UNIBANCO The Brazilian bank's valuation is attractive, has good liquidity in the shares and the Central Bank will probably reduce rates in the coming year.

EMBRATEL The Brazilian long-distance carrier is a more speculative play because it must defend its monopoly in an increasingly competitive environment; however, we believe it will prosper.