(FORTUNE Magazine) – True enough, the bulls ran wild in the U.S. last year as its stocks returned an average 26% to investors, the most of any major market. But that was mere animal feed to the markets of smaller nations, notably those of Latin America. Brazil was the world leader, in local currency at least, with a return to investors of 1,569%. Now, Brazil's bull was no ordinary Taurus. In a country suffering high inflation and a collapsing cruzeiro, investors chose to focus on the prospect for meaningful economic reforms -- leading to better times -- down the road. Is there more upside left? You bet, says Lincoln Rathnam, Scudder Stevens & Clark's Latin America guru. Brazil offers the greatest prospects in Latin America, he says, provided it cleans up its act. Hope springs eternal. Argentina, and reform-minded President Carlos Saul Menem, gave dollar-based investors a meaty 403% return. Menem helped pull his country out of its worst slump since the Great Depression, while bringing chronic hyperinflation down to manageable levels. No wonder investors made this market their mecca. Mexico and Chile rewarded their fans with rich returns too. Both countries were early in the reform process that has swept most of Latin America. Because of the big run-ups in Latin markets, experts advise investors to approach with caution. Europe's bourses were slowed by steep interest rates, which drove money from stocks to high-yielding bonds. Germany set the pace. The Bundesbank pushed long-term bond rates from 8.5% to 9.75%, both to battle inflation and to help lure money to finance the rebuilding of eastern Germany. Bound by economic accords, much of the rest of Europe lifted rates too. With many of Europe's economies in a slump, interest rates should back off in 1992, and stocks could rise. Markets that advanced in 1990 on the strength of a war-driven run-up in oil prices beat a fast retreat in 1991, as Iraq's defeat led to a quick drop in crude. Indonesia and Norway, two big oil exporters, were among the top- performing markets in 1990. But last year their rallies dried up.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: AMONG THE HEAVYWEIGHTS, AMERICA WINS For the second year, U.S. stocks, as measured by Standard & Poor's 500 index, were tops among the world's biggest markets. Higher interest rates held back the bull in Germany and Japan. Britain's bourse got a boost from lower inflation. UNITED STATES UNITED KINGDOM JAPAN GERMANY

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS BRAZIL % Stocks rebounded from 1990 lows as investors bet heavily on the prospect of economic reform. Brazil Fund trades in New York.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS ARGENTINA Economic reforms ended a deep recession and corralled inflation. Argentina Fund trades on the Big Board.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS MEXICO Economic reforms and the promise of more trade with the U.S. sent stocks spiraling up. Three Mexican funds trade in New York.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS CHILE An inflow of money from Chile's compulsory pension plan fueled the market's rise. Chile Fund is on the Big Board.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS PHILIPPINES The market benefited as the political scene improved. The First Philippine Fund trades on the New York Stock Exchange.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS HONG KONG A continued recovery from Tiananmen Square jitters and falling interest rates sent the market higher.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS TURKEY Anticipation that Turkey may enter the EC lifted stocks. Turkish Investment Fund is on the New York Stock Exchange.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS AUSTRALIA Interest rates and inflation fell sharply, giving the market a boost. The 1st Australia Fund trades on the Big Board.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS NEW ZEALAND After a long recession, New Zealand has begun to turn up. Telecom Corp. of New Zealand has an ADR on the New York Stock Exchange.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS SWITZERLAND Big multinational companies that dominate the market had strong earnings. Swiss Hel vetia Fund trades in New York. - CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS INDONESIA After a spike up in 1990, the market slid back on lower oil prices and rising interest rates. Two funds trade on the Big Board.

CHART: NOT AVAILABLE CREDIT: SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL CAPTION: BEST MARKETS NORWAY Slipping oil prices and some big bank failures rattled investors. An ADR for Norsk Hydro trades in New York.