As the "B" in the clever acronym BRIC, Brazil receives most of the attention when it comes to Latin America. And rightfully so, as it is the continent's largest economy. However, some of the best prospects in the region may come from the country's neighbors. Specifically, one neighbor that is commodity rich, democratic and low in debt.

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Underrated Chile
While the nation has received much press as of late, due to the freeing of 33 trapped miners, Chile has been quietly growing into a developing market superstar. The nation has recovered quite nicely from the global credit crisis and analysts predict that GDP will expand by 4.5% to 5% through 2010, and 6% to 7% in 2011. This growth in GDP is partly due to the nation's democratic political structure. It's wiliness to partner with other nations in the global marketplace has earned Chile the distinction of being the only developing country and the first South American country to be admitted to the Organization for Economic Co-operation and Development (OECD).

Favorable foreign investment laws, which do not discriminate like China's A-share rules, have only strengthened Chile's place as an investment destination. Chile has attracted nearly $170 million in foreign biotech investment alone. Chile also has the lowest corporate tax rate in Latin America, attracting companies such as IBM (NYSE:IBM) and Microsoft (Nasdaq:MSFT) to set up shop in the country.

Chile's fortunes have stemmed from its vast commodity empire. As the number one producer of copper, the nation state has used this gift by setting up the state-managed Codelco organization. By efficiently managing its copper resources, Chile has made sure the benefits flow back to its citizens through economic growth. With copper prices surging lately and long-term demand for the metal growing, the nation's success is assured. In addition, Chile is a major producer of gold, timber and various agricultural crops, and is home to one of the best telecommunication networks in all of Latin America.

Portfolio Options
With its stable political and economic environment, Chile features an extremely low debt-to-GDP ratio of just 6.1%. As other developed nations fret about austerity measures and budget cuts, Chile is able to use its A+ credit rating and grow its economy and infrastructure. Investors with long enough timelines can bet on the nations continued success through a variety of means. The broad-based SPDR S&P Emerging Latin America (NYSE:GML) includes a small weighting towards the nation, but there are other options.

The easiest ways to capture the full Chilean economy is through the iShares MSCI Chile Investable Market Index (NYSE:ECH). The exchange traded fund follows 30 of the largest Chilean companies, including lithium specialist Chemical & Mining of Chile (NYSE:SQM) and banking giant Banco Santander-Chile (NYSE:SAN). Expenses for the fund run at 0.65%, and it yields nearly 1%.

Investors can also go the actively managed route with the Aberdeen Chile Fund (NYSE:CH) which trades at a slight discount to its net asset value. The fund holds a more concentrated portfolio, at 19 holdings, and has a distribution rate of 8%. As a side bet, investors can add the iPath DJ-UBS Copper ETN (NYSE:JJC), the nation's chief product.

With its ties to the United States, many of Chile's companies trade as ADRs on the big boards. Investors have plenty of direct investment choices, such as vineyard Vina Concha y Toro S.A. (NYSE:VCO) or regional airline LAN Airlines S.A. (NYSE:LFL).

The Bottom Line
While investors focus strictly on Brazil for their Latin American investments, the smart money is taking a look at some of its neighbors. With a stable government, low debt and vast natural resources, Chile is emerging as one of South America's superstars. Investors with long term portfolios should allocate some capital to the sector either through one of its ETFs or ADRs. (For more, see Broadening The Borders Of Your Portfolio.)

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