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DIANNE M. STOKELY saw what may be the future of Latin America on a memorable business trip last summer. "They were showing me where there were going to be 11 new factories in Monterrey," says Stokely, president of the Latin America and Caribbean division of Federal Express. "But you walk into the factories already in place there, and they are state-of-the-art. And this is going to happen all over Latin America."

Stokely hopes that as free trade spreads throughout the hemisphere that other countries will have similar industrial transformations. In Mexico, for example, more than 600,000 new manufacturing jobs have been created since the inception of NAFTA.

Stokely's long-term faith in Latin America is reflected in major FedEx commitments to the region, particularly its $50 million investment in a 189,000-square-foot shipment facility under construction at Miami International Airport. That hub will help FedEx handle future growth in Latin America and the Caribbean, taking the burden off its worldwide freight hub in Memphis, Tennessee.

Market research confirms a growing number of shippers want to transport products overnight, to or from anywhere in Latin America. The US aircraft manufacturer Boeing Co. has forecast that the volume of freight airlifted between North and South America will grow at an annual rate of 6.2 percent through 2003, and that intra-regional air trade in Latin America will grow even faster, at a 6.7 percent rate. In the five-year period through 2003, "Latin air trade markets will increase by one-third," says Tom Crabtree, a regional marketing director for Boeing.

FedEx is not alone in its appreciation of the opportunities. Several of its biggest rivals, including DHL Worldwide and United Parcel Service (UPS), have made their own sizable investments to serve the region. Fresh from its big initial public offering last fall, UPS is financing new forays into Latin America, including the acquisition of Miami-based South American carrier Challenge Air Cargo, a deal scheduled to close in March 2000. UPS is also negotiating a lease at the Miami airport for its own 30,000-square-foot shipping facility. For its part, DHL has a long-established presence in Latin America and a flock of affiliated cargo airlines in the region, including Aero Expreso in Panama, DHL de Guatemala, Transam in Ecuador and Vensecar International in Venezuela.

"I think it will be a very competitive arena between DHL, FedEx and UPS," Stokely says. But the no-nonsense FedEx leader leaves little doubt that she plays to win: "Our goal is that we are going to be the number one express integrator in Latin America."

The signature service of Federal Express--overnight delivery--is now available between any two major cities in the US, Canada, Mexico, Central America, Puerto Rico and the rest of the Caribbean region. FedEx plans to offer overnight service between any two major cities in the Americas by its self-imposed deadline of 2002, if not sooner. "We will beat that goal," Stokely says.

For Federal Express, Latin America represents one of the last major links in its global service network, which extends to more than 200 countries. After building its domestic base of business in the US, FedEx did business internationally first in Canada, then in Europe and Asia, before making its first push into Latin America in the mid-1990s. "Latin America is like our last frontier," says Stokely, who has run the division since 1996.

Starting as it did with the devaluation of the Brazilian real, 1999 has been an unnerving year for anyone doing pan-regional business in Latin America. But the year wasn't as difficult as feared, says Stokely, who is optimistic about the near-term economic prospects. "We do expect it's going to pick up now," she says. "You look at Mexico, and they are just going gangbusters. Brazil took a tumble, but they seem to have been stabilized for a while, I would say since early summer.

At the same time, legal reforms in Latin America have expedited customs clearance of express air shipments by major couriers. At last count, nine Latin American countries, including Brazil, Chile and Mexico, had liberalized the customs clearance of courier shipments to meet at least some of the guidelines recommended in the so-called Cancun Accord. The non-binding accord, created to foster the growth of express delivery service, was signed in 1996 by 18 countries, and supported by FedEx, UPS and DHL.

In keeping with one guideline of the accord, some Latin American countries have raised or eliminated the value and weight limits built into their official definitions of air "express" shipments, which are supposed to clear customs in hours--unlike shipments labeled "cargo," which may not clear for days. In Brazil, shipments once were classified as express only if they had a value of less than $500; now the maximum value is about $3,000. In Peru, the old maximum weight of 30 kilograms for express shipments has been waived.

While trade barriers may be her biggest problem in Latin America, they certainly are not Stokely's only one. Along side private-sector competitors of FedEx, some public entities are investing in the express business. For example, the Brazilian government-owned postal service, Empresa de Correios e Telegrafos (ECT), reportedly will invest US$30 million in its express-delivery operations to make itself more competitive with large private couriers.

What's more, as FedEx tries to extend its overnight delivery service across South America, the company may face macroeconomic hurdles higher than those set by customs officials. FedEx has a bigger base of business in Mexico than in any South American country, Stokely says. And though they may be promising, countries such as Argentina, Brazil and Chile are not yet delivering the kind of industrial momentum that Stokely saw in Mexico.

Indeed, as a source of export-shipping business, Mexico looks like low-hanging fruit compared to South America. Exports create much more economic activity in Mexico than in countries such as Argentina and Brazil, where they add up to less than 10 percent of total economic output. "Mexico has gone from 11 percent of GDP [gross domestic product] in exports in 1980, to 31 percent in 1998," says Jeffrey D. Sachs, a faculty fellow at the Harvard Institute for International Development. Economically, "Mexico has had a deep transformation. South America has not."