Chinese and Indian stocks? They're sooo 2006. At least that seems to be the prevailing opinion among the more than 79,000 investors participating in Motley Fool CAPS, the Fool's free investor-intelligence community.

These days, many investors want to tap the growth potential of South American stocks. In fact, three of the top 50 rated stocks in the CAPS universe hail from Chile or Brazil.

Feliz ano novo
2007 was a good year for many South American stocks on U.S. exchanges. The top three returns came from Companhia Siderurgica Nacional (NYSE: SID), Petrobras (NYSE: PBR), and Vale (NYSE: RIO), respectively.  

Of course, not all South American stocks surged in 2007. Just as was the case with many U.S. banks, financials like Banco de Chile (NYSE: BCH) struggled with the global credit mess.

While the Argentinean, Brazilian, and Chilean economies are expected to maintain strong growth in 2008, this doesn't necessarily mean that the region's stock markets will keep pace. But never fear -- CAPS investors are here to help you find quality stocks worth researching.

Here are the top five South American stocks right now, all of which carry CAPS' maximum five-star rating.

Company

Country

Industry

Tele Norte Leste Participacoes (NYSE: TNE)

Brazil

Telecommunications

A.F.P. Provida

Chile

Pension fund mgmt.

Aracruz Celulose

Brazil

Paper and paper products

CPFL Energia

Brazil

Electrical utility

Companhia de Saneamento Basico (NYSE: SBS)  

Brazil

Water utility

Data from Motley Fool CAPS.

Please bear in mind that these stocks are not formal recommendations. Instead, they're offered as jumping-off points for further research. Researching five-star CAPS stocks has proven to be an effective tool for investors.

Bringing South America to you
The Fool was so intrigued by investment opportunities in South America, we recently sent members of our Motley Fool Global Gains team to Argentina, Brazil, and Chile to meet with local companies and get a better understanding of investing opportunities in the region. MercadoLibre, known as the eBay of South America; GOL Linhas Areas Inteligentes (NYSE: GOL), a Brazilian airline; and Cresud, an Argentinean farm products manufacturer, were among the companies they visited.  

According to Global Gains senior advisor Bill Mann, while South American economies still have a long way to go in terms of achieving economic stability (they are emerging, after all), South America's "leading economies are rapidly, inexorably diversifying away from being completely beholden to spot prices over which they exert little control."

This is undoubtedly a positive sign for both current and potential investors in South American stocks.

You can see what CAPS investors have to say about MercadoLibre, GOL, or Cresud, or consider a free 30-day trial to Motley Fool Global Gains to see what the team learned from visiting these companies.

Fool contributor Todd Wenning is ranked 991 out of 79,000-plus CAPS players and speaks broken Spanish. He does not own shares of any company mentioned. Cresud is a Global Gains pick. eBay is a Stock Advisor choice. Petrobras is an Income Investor selection. The Fool has a disclosure policy.