Investment Hotspots in Latin America

Money managers and analysts warn of tough times ahead as ongoing concerns about the euro zone debt crisis, high oil prices, and a slowdown in China threaten to bring the recent risk rally to a halt, but one analyst says Latin America is an area that may still prove profitable.

The International Monetary Fund expects Latin America and the Caribbean to grow at a pace three times higher than developed economies this year, but investment experts warn that not all Latin American countries will make for a safe play.

Carlos Caicedo, head of Latin America forecasting at Exclusive Analysis, told CNBC that investors should focus on Brazil, Peru, Colombia, and Mexico.

Caicedo identifies Brazil as one of the coming year’s star performers.

“There’s a very strong emerging middle class, monetary policy is being eased,” Caicedo told CNBC. “There are some concerns about China for Brazil, but I think Brazil is a relatively closed economy and you will see how the domestic market will be the main driver of economic growth this year.”

The Bovespa Index has gained more than 14 percent since the start of the year, outperforming the Dow Jones Industrial Average and S&P 500 index . Manufacturing activity expanded in March for the third consecutive month, pointing to a potential pick-up in growth this year.

Caicedo believes that Brazil is well positioned to weather potential storms this year, including a slowdown in demand from China.

“Brazil has still room to maneuver on monetary policy, they could carry on cutting interest rates,” Caicedo said. “It also has a very robust fiscal position. Foreign direct investment is quite robust. In fact, the main problem for Brazil is too much ‘hot’ money chasing yield and affecting the currency.”

The Brazilian real hit a 12-year high last July and is still trading at around 30 percent above its 2008 levels. This could prove a challenge for Brazil’s economy, according to Caicedo.

“Brazil’s manufacturing industry has been suffering quite heavily, so they’re desperate to keep the real a little bit weaker,” Caicedo said.

Caicedo is also optimistic about the fact that Peru and Colombia will continue to benefit from the boom in commodity prices, while he expects a recovery in the U.S. to provide a boost to the Mexican economy this year.

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Disclosure information for Carlos Caicedo was not immediately available.