Latin American fund managers finished 2004 as the reigning champs of Wall Street for the second straight year. Unfortunately, 2005 is shaping up to be a tough year to defend the title. Like most emerging markets, Latin American stocks soared the last two years on the strength of rising commodity prices in the face of voracious Chinese demand. In 2003 and 2004, Latin American funds gained 62% and 38%, respectively -- much of it coming from energy and mining stocks -- thereby outperforming all other fund categories. Despite this strong performance, most managers of Latin American funds are tempering investor expectations this year, as they expect commodity prices to level off. Gonzalo Pangaro, portfolio manager of the ( PRLAX) T. Rowe Price Latin America fund, says many of the energy and mining stocks that ran up along with oil and materials prices last year are in danger of giving back those gains if prices fall. Nevertheless, Pangaro still sees healthy gains ahead for Latin American stocks as the Brazilian and Mexican economies continue to expand and the political situations in the two countries remain stable. TheStreet.com chatted with Gonzalo Pangaro to get his 2005 views on Latin American stocks and the politics that help move them. What are your projections for Latin American stocks in 2005, coming off two very strong years? We are moderately optimistic about Latin America for this year. We do not expect to see the returns we've seen in 2003 and 2004. But in general we still think that economies are growing and valuations look reasonable. So we expect returns in the order of 15%. That's still very good! From which countries do you expect to see the best returns? We are very bottom-up in our research. As you know, Latin America is a very narrow universe of stocks. Our largest positions are in Mexico and Brazil, and that's where we see the best opportunities. The other major market is Chile, but we think most companies are overpriced there, so we have underweighted our position there.