South America ... just those two words might be enough to send some grizzled investors into a cold sweat. A land of coups, hyperinflation, debt defaults, and generally poor performance throughout much of a century is the cross that an entire continent bears when it comes to perception about investment prospects in this region of the world. Heck, I've seen respected investment houses recommend ZERO investment weighting in this region to their institutional clients.

But you know what? Lay those conditions out in front of me, and I'm more likely to respond by saying, "Me like-ee." After all, if everyone else is scared spitless, there are often bargains to be had by the intrepid.

The basic investment thesis for me across the continent is one of improving performance. Countries such as Brazil, Peru, Chile, and Argentina have been basket cases. In fact, they would have brought disrepute to the notion of basket cases. But that's yesterday, and if you believe in investing in yesterday, might I suggest some Colecovision or LA Gear stock to you?

Ultranationalists like Chavez (in Venezuela) and Morales (in Bolivia) may be giving the region a bad rep, but take a look at what has been accomplished lately in Brazil, Argentina, and Chile. And don't forget to look at the improvements in recent years in Colombia and Peru, either. Governments are starting to behave in more rational ways, corruption is ebbing, and private businesses are starting to come into their own.

So, what does this mean for YOU, our investor-readers? Most countries in South America give you three classic emerging-market investment options -- telecom, banks, and mining/resources.

The mining and resource stocks ranging from CVRD (NYSE:RIO) to Petrobras (NYSE:PBR) to Pan-American Silver (NASDAQ:PAAS) (which is technically a Canadian company, although it operates in Mexico and South America) have done well in recent years. And though I'm not about to lay my head on the block and predict the end of the commodity boom, I'd be careful here.

Instead, look at stocks of companies that might have more to gain from the overall improvement in economic conditions in these countries. If citizens and small businesses in Argentina and Brazil are doing better, that should be good for Banco Frances (NYSE:BFR) and Banco Itau (NYSE:ITU). And don't forget companies in industrial sectors as well. The list may be short now, headed by Embraer (NYSE:ERJ), but I'm always on the lookout for a good manufacturing or consumer goods story like AmBev (NYSE:ABV).

Let's also not forget a significant advantage to South American investing -- you can actually invest here. Want to invest in the Czech Republic, Bulgaria, Poland, or Russia? Good luck -- there just aren't many liquid stocks out there. I consider myself to be both a fairly sophisticated investor and a bull on Poland and the Czech Republic, but it's a pain in the derriere to invest there. And if it's tough for a guy who does this full-time, I can only imagine what it's like for investor with a day job and maybe an hour or two a day to devote to investing.

South America certainly has its challenges. Countries will have to prepare themselves for the end of the commodity boom and find a path toward sustainable economic growth. But that's a challenge in many parts of the world. What's more, many of these countries have growing populations, improving standards of living and education, and a vested interest in rational government -- all of which point the way to some optimism about the future.

South America is facing Eastern Europe in this Investing World Cup match. Go back to the intro page to navigate your way to another part of this contest, and then vote for the region that you think should advance to the next round of the tournament.

Embraer is a Motley Fool Stock Advisor pick. Take the newsletter for a 30-day free trial.Or, for more international stock ideas, tryThe Motley Fool International Report: Around the World in 80 Minutes.

Fool contributor Stephen Simpson but has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

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