Politics: Is Latin socialism a real threat?

Traders have also been keeping a close eye on the region’s political developments. Latin America is in the midst of a run of important elections, with a total of 12 presidential elections from November 2005 into 2006. Seven of those have already taken place, with the Mexican presidential election on July 2, Ecuador and Brazil looming in October, Nicaragua in November, and Venezuela in December.

Despite a surge of new socialist political leaders in the region, many market players downplay the risk to overall growth patterns or financial stability.

“The political climate hasn't been as dramatic and scary as in past years,” Coutino says.

He says the new wave of leftist governments in Venezuela, Bolivia, and Peru — and a potential leftist victory in Argentina — do not reject the free market model.

“They want to complement free market policies with public policies to promote social development,” Coutino says.

In fact, democracies in Brazil, Chile, and Argentina have led to more open economies.

“There are more international observers and it is more difficult to commit fraud in elections,” Coutino says. Despite the flurry of elections this year, “international investors are still going to these markets. There is confidence among investors that the political environment will not be the main factor to disrupt the economy this year.”