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(Story updated to note that Brazil's 2012 inflation rate forecast was trimmed to 5% from 5.5% by Banco Santander.)



) -- The best investment returns this year are coming from Latin America, where Brazilian banks and oil companies have driven the region's average share-price gains into double digits.

That's due mainly to the Brazil central bank's easing of its monetary policy, the region's growing middle class, and China's sustained demand for Latin America's commodity exports.

Latin American stocks, as measured by the

MSCI EM Latin America USD Index

, are up an average 15.9% this year through Feb. 14, more than double the

S&P 500's

7.4% gain and a shade behind the Hong Kong

Hang Seng Index's

world-leading 16.3% return.

That's a big turnaround from 2011, when Latin American stocks plunged 22.6%, the second-worst regional category performance, according to Morningstar.

The region's history of volatility is still keeping investors cautious. EPFR Global reports that Latin America equity funds have grown by $464 million this year through Feb. 14 after huge outflows last year.

S&P Capital IQ equity analyst Esther Kwon attributed the region's revival to promising signs in "the eurozone bailout progress, potential signs of a soft landing in China and some improvement in U.S. economic data," which, she said, make top-ranked Latin America-focused mutual funds attractive as portfolio diversifiers.

The same holds true for its individual stocks.

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"Certainly, the region's prospects depend on a recovery in developed countries' economic growth and strong commodity prices," Kwon wrote in a recent research note. The World Bank has forecast GDP growth of 3.6% in 2012 and 4.2% in 2013 for the region, a bit below developing countries' growth projection of 5.4% in 2012.

On a positive note,

Banco Santander

(BSBR) - Get Banco Santander (Brasil) SA Report

reduced its forecast for Brazil's inflation rate this year to 5%, from its previous 5.5% estimate, as it expects the rise in regulated prices to slow and electricity price increases to be muted, the bank said Monday. Brazil's inflation rate reached 6.5% last year.

Here are

10 highly rated, top-performing Latin American stocks

trading as American Depositary Receipts (ADRs) in inverse order of returns this year. Note that many of those with the highest returns are paying hefty dividends:


Petroleo Brasileiro

(PBR) - Get Petróleo Brasileiro SA Report

Company profile:

Petrobras is a Brazil-based integrated energy company controlled by the Brazilian government that focuses on the exploration and production for oil and gas in Brazilian offshore fields.

Investor takeaway:

Its shares are up 15% this year and have a three-year annualized return of 7%, but over the past five years, returns have been highly volatile. The shares carry a 0.56% dividend yield.

Net income has grown at a 33% annual rate over the past three years. S&P has its shares rated "hold," and in a survey, found nine "buy" ratings, four "buy/holds," and six "holds." Morningstar analysts say "With the recent discovery of vast oil and gas resources offshore Brazil, Petrobras appears to have a bright future," but note that recent poor earnings results underscore its volatility.


National Electricity Company of Chile


Company profile:

The company generates electricity for customers in Chile, Argentina, Brazil, Colombia, and Peru from its hydroelectric plants and thermal units.

Investor takeaway:

Its shares are up 15% this year and have a three-year annualized return of 12% and its shares have a 0.98% dividend yield. S&P found two "buy" ratings, two "buy/holds," three "holds," and one "weak/hold," in a survey of analysts. Those same analysts expect 2012 earnings will grow by 12% to $3.57 per share.


Itau Unibanco Holding SA

(ITUB) - Get Itaú Unibanco Holding SA Report

Company profile:

Itau Unibanco Holding SA Itau Unibanco is Latin America's largest nongovernment bank.

Investor takeaway:

Its shares are up 16% this year and have a three-year annualized return of 32%. S&P found five "buy" ratings, five "buy/holds," and three "holds," in a survey of analysts. Net income has grown at a 33% rate annually over the past three years and its shares carry a 0.49% dividend yield.

A Morningstar analyst said that "Itau Unibanco is poised to profitably expand in Brazil and Latin America as one of the predominant players in the market," although it's subject to the volatility of the region, which can be particularly negative for bankers if inflation picks up.


Brazilian Distribution

(CBD) - Get Companhia Brasileira de Distribuicao Report

Company profile:

Brazilian Distribution is a leading grocery-store chain with more than 600 stores and more than a 13% share of the food retailing market, and it caters to all income levels. It also owns consumer electronics and home appliance stores.

Investor takeaway:

Its shares are up 20% this year and have a three-year annualized return of 50%, and carry a 0.38% dividend yield. S&P's analyst survey found two "buy" ratings, three "buy/holds," two "holds," and one "weak/hold." Those same analysts' consensus estimate is that earnings will grow by 32% this year to $2.08 per share.


Ultrapar Holdings

(UGP) - Get Ultrapar Participaçoes SA Report

Company profile:

Ultrapar, of Brazil, is a diversified industrial company as a distributor of liquefied petroleum gas, a provider of storage services for chemical and fuel companies and as a producer of a variety of commodity and specialty chemicals. Its controls 23% of retail fuel distribution in Brazil.

Investor takeaway:

Its shares are up 20% this year and have a three-year annualized return of 52% and its shares carry a 2.85% dividend yield. Analysts' consensus is for earnings growth of 20% this year to $1.09 per share. Per S&P, analysts give its shares three "buy" ratings, one "buy/hold," and two "holds."



(EC) - Get Ecopetrol SA Report

Company profile:

Ecopetrol operates as an integrated oil company in Colombia, Peru, Brazil, and the U.S. Gulf Coast. The company engages in the exploration, development, and production of crude oil and natural gas. The government holds nearly a 90% stake in the company.

Investor takeaway:

Its shares are up 20% this year and have a three-year annualized return of 50% and its shares carry a 3.98% dividend yield. S&P doesn't have it rated but in a survey of analysts, it found two "buy" ratings and seven "holds."



(VALE) - Get Vale SA Report

Company profile:

Vale is the world's largest iron ore producer and second-largest nickel producer, which means its performance is tied to that of the world's steel industry. Its mines are primarily in Brazil, but it also owns mines from Canada to Indonesia.

Investor takeaway:

Its shares are up 20% this year and have a three-year annualized return of 20%, and a 4.45% dividend yield. S&P gives its shares a "buy" recommendation and the company a four star rating out of a possible five. The ratings firm found eight "buy" ratings, eight "buy/holds," and seven "holds," in a survey of analysts.


Companhia Siderurgica Nacional

(SID) - Get Companhia Siderurgica Nacional Report

Company profile:

CSN is the second largest flat-rolled steelmaker in Brazil and last year it purchased steel mills in Germany and Spain. It is also the world's sixth-largest iron ore miner and uses about 40% of it internally and exports the rest, mainly to China.

Investor takeaway:

Its shares are up 28% this year and have a three-year annualized return of 14%, and carry a 6.28% dividend yield. S&P doesn't rate its shares, but in a survey of analysts it found two "buy" ratings, one "buy/hold," three "holds," two "weak/holds," and one "sell."


Banco Santander Brasil

(BSBR) - Get Banco Santander (Brasil) SA Report

Company profile:

Banco Santander Brasil is the third-largest non-government-controlled bank in Brazil, with about $250 billion in assets and roughly a 10% deposit and loan market share.

Investor takeaway:

Its shares are up 29% this year and 26% in the past three months and carry a 3.83% dividend yield.

Morningstar analysts say: "Even with its provisioning headwinds, we think Santander Brasil's sturdy growth in interest and fee income will keep generating healthy earnings. This will keep strengthening the firm's already strong capital position." The ratings firm has a $15 price target on its shares, which is a 39% premium to its current price.



(GGB) - Get Gerdau SA Report

Company profile:

Gerdau is the second-largest producer of long steel products in the world. It has operations in 14 countries in North and South America, Europe, and Asia. The company also has significant investments in iron ore mining, coke production, and scrap recycling and uses that as a resource for its steel production.

Investor takeaway:

Its shares are up 30% this year and have a three-year annualized return of 15%. Its shares have a 2.56% dividend yield. S&P found four "buy" ratings, two "buy/holds," two "holds," and one "weak/hold" in its survey of analysts. Those same analysts' consensus is for 2012 earnings to rise 10% to $1.30 per share.


(C) - Get Citigroup Inc. Report

cut Gerdau to "neutral" from "buy," Wedensday and

Morgan Stanley

(MS) - Get Morgan Stanley Report

trimmed its rating to "equalweight" from "overweight," citing the steelmaker's share-price run-up and concerns that steel prices in Brazil will stagnate on weak demand and that that will hurt profitability.

>>To see these stocks in action, visit the

10 Latin American Stocks Soaring Up to 30% in 2012

portfolio on Stockpickr.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.