Misconceptions abound about the region, agrees Anthony Welch, a money manager and analyst at Sarasota Capital Strategies. "Some countries are shakier than others, but the region isn't as tied to the U.S. economy as a lot of people still believe," he said. "Considering that these are rapidly growing emerging countries and Latin America's abundance of materials and natural resources, I don't see how Latin America can be dragged down too much from a relatively mild downturn in the U.S."

How much Latin America is ready to stand on its own economic footing, Coutino adds, can be seen by market movements in the last half of 2007 and early this year.

In the past, a significant slowdown in the U.S. would start showing an impact in Latin America within three months. While some such as the IMF are expecting such signs to begin showing up in Latin America soon, Coutino observes that the region has maintained its momentum for much longer than during past U.S. slowdowns.

"The important factor is that Latin America's growth has continued for more than six months after signs of a recession showed up in the U.S.," he said.

Private consumption, investment spending both domestically and from foreign interests have continued to produce relatively strong growth numbers through the first quarter, Coutino says.

In the IMF research, Mexico was highlighted as the country most vulnerable to a deeper U.S. recession. The iShares MSCI Mexico Index (NYSE: EWW) is up more than 3% in 2008.  "It's going to be impacted, just like everyone else in the region," Coutino said. "But there are two important factors that make it unlikely for Mexico to be as affected as the past."

Mixed Bag

For one, Mexico's fiscal and trade pictures remain quite strong. And also, the government is implementing fiscal stimulus to boost domestic consumption. "Since the beginning of the year, they implemented tax cuts, more subsidies and a huge program of investment in public and private infrastructure," Coutino said.

But he is forecasting moderating growth for Mexico, about flat with last year's 3% rate. "So it's going to be a very mild slowdown," he said.

Still, Latin America lags emerging Asia in terms of industrialization, Coutino says. In fact, if emerging markets are hit by a bigger slowdown in developed parts of the world, he agrees with other economists who are predicting that Latin America likely will suffer more than most of emerging Asia.

But he expects Brazil to remain the region's emerging star for some time. It has been expanding in the past five years with GDP growth averaging about 5% per year. He's forecasting around 4.9% this year compared with 5.4% in 2007.

The iShares MSCI Brazil Index (NYSE: EWZ) has gained around 4% in 2008.

"It has been opening the economy to foreign investment, which has diversified its base," Coutino said. "But it's still behind emerging Asia since there are still some sectors that remain closed. That has restricted the economy's capacity to grow."

Independent manager Welch, who's based outside Sarasota, Fla., has been invested in ILF since August 2006 and doesn't plan to sell any if short-term conditions deteriorate. On his watch list is the new iShares MSCI Chile Index (NYSE: ECH).

"Latin America can be very volatile, so we're staying with the more diversified ILF right now," Welch said. "But if we were just looking at getting into the region for the first time now, we'd probably go with a combination of ECH and EWZ."

Besides holding more than 60% in Brazil, ILF has about another quarter of its stocks in Mexico. That country is the ETF's second-biggest concentration. "We'd just as soon leave Mexico out of the equation right now in terms of investing in Latin America," Welch said.

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