LATIN AMERICA EQUITY FUND INC, N-30D, 1996-08-30

LATIN AMERICA EQUITY FUND INC
N-30D, 1996-08-30

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<PAGE>

The Latin America Equity Fund, Inc.
...................................
SEMI-ANNUAL REPORT
JUNE 30, 1996

<PAGE>

CONTENTS

Letter to Shareholders 1
Portfolio Summary 6
Schedule of Investments 8
Statement of Assets and Liabilities 14
Statement of Operations 15
Statement of Changes in Net Assets 16
Financial Highlights 17
Notes to Financial Statements 18
Results of Annual Meeting of Shareholders 23
Description of Dividend Reinvestment and Cash Purchase Plan 24

PICTURED ON THE COVER IS THE INTERIOR OF THE BUENOS AIRES STOCK EXCHANGE,
BOLSA DE COMERCIO DE BUENOS AIRES ("BOLSA"). THE BOLSA, WHICH HAS
DISCIPLINARY AUTHORITY OVER LISTED COMPANIES, IS SUPERVISED BY THE NATIONAL
SECURITIES EXCHANGE COMMISSION (COMISION NACIONAL DE VALORES OR "CNV").
- -------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS

August 7, 1996

DEAR SHAREHOLDER:

We are pleased to report on the activities of The Latin America Equity Fund,
Inc. (the "Fund") for the six months ended June 30, 1996.

PERFORMANCE

At June 30, 1996, the Fund's net assets were $149.7 million. The Fund's net
asset value ("NAV") was $17.42 per share, as compared to $14.93 on December 31,
1995.

For the period January 1, 1996 through June 30, 1996, the Fund's total return,
based on NAV, was 16.7%. By comparison, the total return of the Morgan Stanley
Capital International Emerging Markets Latin America Free Index (the "Index")
was 17.5%. From the commencement of investment operations on October 30, 1991
through June 30, 1996, the Fund's total return based on NAV and assuming
reinvestment of dividends and distributions increased by 90.4%. The Index rose
87.0% during this period.

INVESTMENT PERSPECTIVE

It is now some 18 months since the so-called "Tequila crisis," which resulted in
the substantial depreciation of the Mexican Peso in December 1994. Many
observers publicly wondered how far-reaching the crisis' impact would be, not
simply on Mexico's economic reform program, but on Latin America as a whole. The
possibility of serious adverse consequences for investors was very real.

Developments since that time have actually proven to be quite positive, with
Mexico's recent $6 billion refinancing perhaps the best example of how much
better things have become. Underlying trends are becoming more favorable, so
much so that we see the process of reform being deepened throughout the region.
In addition, we have noted improvements in Latin American economic performance
generally, including:

- - Brazil's successful lowering of inflation, now likely to be less than 15% this
year.

- - Continued foreign exchange stability in Argentina, despite the nervousness
caused by the Tequila crisis.

- - Successful resolution of problems in the Mexican banking system, which at one
point appeared close to collapse.

We believe that the ongoing development and growth of Latin American economies
will continue to offer the Fund many new opportunities in the future. Our theme
is simple: for developing economies to grow, basic as well as increasingly
sophisticated goods and services must be provided. Delivery of the latter on a
level sufficient for growth means that companies providing these and other goods
and services are likely to generate high internal rates of return.

To best illustrate how we have put our investment philosophy to work, we'd like
to discuss a few of our specific holdings.

- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS

TELECOMUNICACOES BRASILEIRAS S.A.

Since our last report, we have added the largest telephone company in Brazil,
Telecomunicacoes Brasileiras S.A. ("Telebras"), to the Fund's holdings. We
consider Telebras one of the brightest telecommunications opportunities among
Latin American equities. It is uniquely situated to benefit from Brazil's
economic reinvigoration and growing demand for phone service. Reduced inflation
in Brazil has increased affordability of service and the waiting list of
phone-line applicants is substantial.

The low teledensity and rising phone tariff are particularly positive for
Telebras' growth prospects.

- - Brazil's teledensity is much lower than that of many of its Latin American
neighbors, meaning that Telebras should reap significant benefits merely by
introducing phone service to those currently without it.

- - Historically, Brazilian phone tariffs were much lower, relative to those of
many other countries, in most categories of usage. This had the effect of
limiting Telebras's potential revenues and profits. However, in November 1995,
Brazil significantly raised tariffs for most usage categories. Local call
tariffs were boosted again in January 1996. The outlook for Telebras
considerably improved, and its revenues subsequently were projected to
increase in 1996 and thereafter.

Telebras' 1996 results thus far have been spectacular. Driven by higher tariffs,
increasing usage and lower corporate tax rates, revenues and net income have
soared. Performance has been so strong, in fact, that Telebras generated 42%
more net income in the year's first five months than it did in all of 1995.
Clearly, its long-term investment prospects are outstanding.

CEMENTOS MEXICANOS, S.A. DE C.V.

Another recent addition to the Fund is Cementos Mexicanos, S.A. de C.V.
("Cemex"). We feel that Cemex has significant positive attributes that make it a
compelling investment:

- - It is the fourth-largest cement producer in the world, one of a handful of
cement companies with international capabilities and the only one of the
latter domiciled in an emerging market. In addition, it dominates cement
production in Mexico.

- - Due to its swelling exports (notably to Asia and Latin America) and overseas
operations, Cemex represents a strong investment play on the growth of
emerging markets' infrastructures.

- - Its overseas acquisition strategy (i.e., "buy, don't build") enables it to
obtain immediate local market share and the pricing power that goes along with
it. Moreover, it has been able to substantially increase the profitability of
acquired operations via cost cutting and improvements in facilities and
processes.

- - It should benefit from the remarkable economic recovery of Mexico, whose
outlook we consider among the emerging world's most promising.

- - Because sales in Mexico have long accounted for most, if not all, of total
sales, we feel that many investors misperceive Cemex as a strictly Mexican
company rather than a budding international giant.

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2
<PAGE>
LETTER TO SHAREHOLDERS

As the dominant player in its home market, Cemex benefits disproportionately
from the Mexican cement industry's high barriers to entry. Barriers include the
substantial investment of capital and time needed to buy or build a plant; a
highly fragmented, mostly retail customer base; control of local distribution
channels by Cemex and number-two producer Cementos Apasco, S.A. de C.V.; cash
costs among the lowest in the world; a lack of suitable substitutes; the
presence of three of the world's five major global players; and the lack of
adequate port facilities for imports.

Beginning in 1992, overseas expansion has been a priority for Cemex, which would
likely reduce its dependence on the Mexican market. It has already made
tremendous progress. The Mexican proportion of total sales dropped to 38% in
1995 from 67% in 1994. Furthermore, long-term, Cemex's goal is to become a truly
global cement company by increasing international sales to two-thirds of total
sales. Why? The answer, simply, is that it is too costly not to do so:

- - Since the other global players (Holderbank [Switzerland], Lafarge [France],
Italcementi [Italy] and Blue Circle [United Kingdom]) have entrenched
positions in many world markets, Cemex must expand in order to be competitive.

- - As the global players continue to consolidate market share and power, overseas
acquisition candidates for Cemex decline in number and rise in price.

- - Expansion brings with it the potential for diversification of cash flows,
margin improvement, greater pricing flexibility and access to capital markets
in other countries.

- - Higher margins and pricing flexibility are two especially attractive features
of emerging markets.

Cement demand in Mexico has been weak for most of the period since late 1994.
This is changing, however, as pricing is firming, government sponsored
construction programs are being legislated and, generally, the strengthening
Mexican economy puts the agonizing Tequila crisis in the past. Cement company
stock performance has reflected the downturn, and we sense that prices will rise
as the improving environment becomes clearer to investors.

ENERSIS S.A.

Enersis S.A. ("Enersis"), a Chilean electricity holding company, has been held
in the Fund for some time. It is among the top players within its universe and
fits well with our preference for companies that provide basic goods and
services.

Enersis is the largest and most powerful electricity company in Latin America.
By acquiring and combining providers of generation, transmission and
distribution services, it has assembled a vertically integrated electricity
network extending throughout Chile and into Argentina and Peru. This enables it
to realize operating synergies and economies of scale and enhances its ability
to expand further.

To achieve most of its growth, Enersis acquires less efficient companies (mostly
via foreign privatization) and raises their efficiency and profitability to
levels it has achieved in its own domestic operations. While this is a strategy
that may not be familiar to United States investors, it is not one that they
would typically associate with an electricity company.

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3
<PAGE>
LETTER TO SHAREHOLDERS

Here is a brief summary of why we like Enersis and are inclined to maintain it
as a long-term holding:

- - SHREWD RISK-CONTROL VIA DIVERSIFICATION. By acquiring other regional
utilities, it reduces its reliance for revenues on any one country or
territory, widens its utility specialization into different segments (i.e.,
generation, transmission and distribution), builds a fairly predictable
revenue stream and remains focused on a relatively low-risk business.

- - ATTRACTIVE SERVICE TERRITORY. Electricity demand is increasing in Enersis'
markets. Furthermore, regulation is relatively favorable; unlike in the United
States, utilities are not limited to fixed rates of return, meaning that the
potential for profitability is much higher.

- - HIGH-QUALITY, EXPERIENCED MANAGEMENT TEAM.

- - MULTI-DIMENSIONAL EQUITY PLAY. Enersis shares are a very effective way of
investing in the growing Latin American utility privatization trend; the
strong projected regional demand for electricity and the "safe haven" of the
Chilean economy also make the shares attractive to investors.

- - PRIVATIZATION. Enersis deep acquisition and operational experience make it a
likely and highly desirable participant in the numerous upcoming privatization
opportunities among Latin American utilities (particularly in Brazil). It is
also the only regional utility company with access to the level of capital
required in the privatization process.

- - DOMESTIC DOMINANCE. Through its controlling equity interests in Chilectra S.A.
and Compania Electrica del Rio Maipo S.A. (Chile's largest and fourth-largest
electricity distribution companies, respectively), as well as Empresa Nacional
de Electricidad S.A. (Chile's largest electricity generation company), Enersis
is Chile's dominant electricity company.

- - STABLE DOMESTIC OWNERSHIP BASE. Chilean pension funds and employee-owned funds
own approximately 64% of Enersis shares and are likely to hold them for the
very long-term.

OUTLOOK

In the near-term, we have fairly favorable views on the Fund's core markets:

- - ARGENTINA'S prospects are far less clear following the July dismissal of
Economic Minister Cavallo, who was the primary force behind his country's
remarkable economic turnaround. Uncertainty may well pervade the local
economic environment for some time.

- - BRAZIL continues to progress along its course of economic liberalization, much
to the Fund's benefit. Strong fundamentals do not justify the recent sell off
in Brazilian equities, whose valuation levels are now more attractive than
previously. Our outlook remains auspicious.

- - We see no reason to suggest that CHILE'S reputation as the safe haven among
Latin American markets has changed. Therefore, we have confidence in the
positive prospects for Chilean equities.

- - Economic developments in MEXICO, we suspect, will be meaningfully affected by
political considerations as the 1997 congressional elections draw nearer. The
likelihood of an associated upturn in government spending bodes especially
well for our consumer and infrastructure-related holdings.

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4
<PAGE>
LETTER TO SHAREHOLDERS

Looking further ahead, we feel optimistic about equities in Latin America. The
global monetary environment appears to be less of a concern, while overall
worldwide growth should pick up. There is less worry about current account
deficits within the region and the corporate sector has responded well to tough
business conditions. The operational leverage of many companies, furthermore, is
quite high due to rising volumes and reduced costs.

Finally, we think that, in the aggregate, political developments have been very
positive. Indeed, Latin governments have chosen to adopt even more austere
economic policies despite the problems caused by the Tequila crisis. We view
this as a rather favorable trend and, all in all, we sense good potential for
long-term appreciation.

We wish to remind shareholders whose shares are registered in their own name
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment Plan (the "Plan") can be of value to
shareholders in maintaining their proportional ownership interest in the Fund in
an easy and convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Plan are described on pages 24 and
25 of this report.

We appreciate your continued confidence in the Fund and would be pleased to
respond to your questions and comments.

Sincerely yours,

[SIG]
Emilio Bassini*
President and Chief Investment Officer

- --------------------------------------------------------------------------------
*Emilio Bassini, who is a member of the Executive Committee and Executive
Director of BEA Associates, is primarily responsible for management of the
Fund's assets. He has served in such capacity since the commencement of the
Fund's operations. Mr. Bassini joined BEA Associates (formerly Basic Appraisals,
Inc. and BEA Associates, Inc.) in 1984. Mr. Bassini is a Director, Chairman of
the Board, President and Chief Investment Officer of the Fund and is also a
Director, Chairman of the Board, President and Chief Investment Officer of The
Chile Fund, Inc., The Emerging Markets Infrastructure Fund, Inc., The Emerging
Markets Telecommunications Fund, Inc., The First Israel Fund, Inc., The Latin
America Investment Fund, Inc. and The Portugal Fund, Inc. He is also the
President and Secretary of The Indonesia Fund, Inc., and Director, Chairman of
the Board, President and Investment Officer of The Brazilian Equity Fund, Inc.
He is also the managing principal of Bassini, Playfair + Associates LLC.

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5
<PAGE>
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THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ASSET BREAKDOWN

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C>
6/30/1996 12/31/1995
Argentina 8.21% 15.93%
Bolivia 0.65% 0.65%
Brazil 31.36% 22.87%
Chile 23.68% 27.48%
Colombia 1.61% 0.71%
Ecuador 0.76% 0.85%
Latin America 1.23% 2.66%
Mexico 16.15% 15.28%
Peru 6.90% 4.10%
Puerto Rico 1.06% 1.05%
Venezuela 0.56% 2.43%
Cash & Other Assets 7.82% 5.99%
</TABLE>

SECTOR ALLOCATION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C> <C>
6/30/1996 12/31/1995
Banking 6.77% 7.30%
Cement 4.53% 3.60%
Electric Distribution 4.43% 5.30%
Electric Generation 1.90% 2.80%
Engineering & Construction 2.23% 1.90%
Food & Beverages 12.46% 14.70%
Forestry 2.52% 3.10%
Holding Companies 4.58% 5.00%
Mining 2.48% 1.40%
Natural Gas 4.57% 5.00%
Retail 2.50% 3.10%
Steel 4.96% 5.10%
Telecommunications 10.92% 9.40%
Utilities 8.75% 9.60%
Fixed or Floating Rate
Investments 3.93% 4.80%
Other 14.65% 11.90%
Cash & Cash Equivalents 7.82% 6.00%
</TABLE>

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6
<PAGE>
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THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF JUNE 30, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER

<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country Assets
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1. Federal Republic of Brazil, IDU, Series A, 6.37%, Fixed or Floating Rate
01/01/01 Investments Brazil 3.9
- ---------------------------------------------------------------------------------------------------------------------------------
2. Centrais Eletricas Brasileiras S.A. Utilities Brazil 3.3
- ---------------------------------------------------------------------------------------------------------------------------------
3. Banco de Credito e Inversiones Banking Chile 2.5
- ---------------------------------------------------------------------------------------------------------------------------------
4. Corporacion Industrial SanLuis, S.A. de C.V. Holding Companies Mexico 2.2
- ---------------------------------------------------------------------------------------------------------------------------------
5. Embotelladora Polar S.A. Food & Beverages Chile 2.1
- ---------------------------------------------------------------------------------------------------------------------------------
6. Companhia Paulista de Forca e Luz Utilities Brazil 2.1
- ---------------------------------------------------------------------------------------------------------------------------------
7. Telecomunicacoes do Rio de Janeiro S.A. Telecommunications Brazil 2.0
- ---------------------------------------------------------------------------------------------------------------------------------
8. Camuzzi Argentina S.A. Natural Gas Argentina 1.8
- ---------------------------------------------------------------------------------------------------------------------------------
9. Grupo Elektra, S.A. de C.V., CPO Retail Mexico 1.8
- ---------------------------------------------------------------------------------------------------------------------------------
10. Companhia Tecidos Norte de Minas S.A. Textiles Brazil 1.7
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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7
<PAGE>
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THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS - JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
<S> <C> <C>
- -----------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-88.25%
ARGENTINA-8.20%
BANKING-0.59%
Banco de Galicia
Convertible Bond, 7.00%,
08/01/02................ USD 800 $ 884,000
-----------
FOOD & BEVERAGES-0.25%

<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Quilmes Industrial
S.A..................... 24,600 252,150
Quilmes Industrial S.A.
ADR+.................... 12,300 126,075
-----------
378,225
-----------
NATURAL GAS-4.57%
Camuzzi Argentina
S.A.*................... 1,403,504 2,670,096
Capex S.A., Ord.......... 177,900 1,441,531
Compania Naviera Perez
Companc S.A., Class B... 162,720 1,066,216
Sodigas del Sur S.A.*.... 421,485 782,592
Sodigas Pampeana S.A.*... 583,264 886,935
-----------
6,847,370
-----------
OIL-0.54%
YPF Sociedad Anomina..... 36,165 814,018
-----------
REAL ESTATE-1.03%
Inversiones y
Representaciones S.A.... 460,194 1,542,228
-----------
TELECOMMUNICATIONS-0.83%
Argentine Cellular
Communications Holdings
Ltd.@*+................. 237,966 1,249,321
-----------
UTILITIES-0.39%
Central Puerto S.A.
ADR++................... 31,700 582,329
-----------
TOTAL ARGENTINA (Cost $11,518,213)...... 12,297,491
-----------
BOLIVIA-0.66%
UTILITIES-0.66%
Compania Boliviana de
Energia Electrica S.A.
(Cost $600,000)......... 25,000 981,250
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>

BRAZIL-27.43%
BANKING-1.85%
Banco Bradesco S.A. ON... 149,305,328 $ 1,069,069
Banco Bradesco S.A. PN... 155,343,137 1,268,549
Banco do Brasil S.A.
PN+(a).................. 55,382,000 438,467
-----------
2,776,085
-----------
BUSINESS SERVICES-0.86%
Multibras da Amazonia
S.A. PN................. 960,000 1,290,644
-----------
CHEMICALS & PETROLEUM PRODUCTS-1.55%
Petroleo Brasileiro S.A.
PN...................... 18,869,333 2,320,732
-----------
CONSUMER GOODS-0.09%
Tec Toy Industria e
Comercio PN+............ 373,587,000 130,215
-----------
FOOD & BEVERAGES-2.87%
Companhia Cervejaria
Brahma PN............... 3,363,202 2,006,232
Santista Alimentos S.A.
ON+..................... 1,298,000 2,042,364
Serrana S.A. PN+......... 330,240 253,234
-----------
4,301,830
-----------
HOLDING COMPANIES-1.50%
Brasmotor S.A. PN........ 715,000 223,582
Investimentos Itau S.A.
PN...................... 2,633,500 2,019,414
-----------
2,242,996
-----------
MANUFACTURING-1.09%
Continental 2001 S.A.
PN...................... 32,712,935 724,855
Refrigeracao Parana S.A.
PN...................... 362,420,000 902,305
-----------
1,627,160
-----------
MINING-0.52%
Companhia Vale do Rio
Doce PN................. 39,828 771,453
-----------
RETAIL-0.45%
Lojas Americanas S.A.
PN...................... 34,192,266 674,209
-----------
STEEL-1.89%
Bardella Industrias S.A.
PN...................... 4,065 455,423
Companhia Siderurgica
Nacional ON............. 46,446,840 1,184,125
</TABLE>

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8
<PAGE>
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THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
STEEL (CONTINUED)
Usinas Siderurgicas de
Minas Gerais S.A.
ADR++................... 40,000 $ 432,600
Usinas Siderurgicas de
Minas Gerais S.A. PN.... 722,693,000 762,889
-----------
2,835,037
-----------
TELECOMMUNICATIONS-4.93%
Telecomunicacoes
Brasileiras S.A. ADR.... 18,400 1,281,100
Telecomunicacoes de Minas
Gerais S.A. ON,
Receipts+............... 276,853 22,608
Telecomunicacoes de Minas
Gerais S.A. PNB......... 20,500,000 2,113,185
Telecomunicacoes do
Parana S.A. ON+......... 2,094,000 900,849
Telecomunicacoes do Rio
de Janeiro S.A. ON+..... 1,760,000 184,036
Telecomunicacoes do Rio
de Janeiro S.A. PN+..... 25,609,000 2,881,857
-----------
7,383,635
-----------
TEXTILES-1.69%
Companhia Tecidos Norte
de Minas S.A. PN........ 6,414,500 2,532,838
-----------
TRANSPORTATION-0.44%
Marcopolo S.A. PN........ 2,896,990 663,266
-----------
UTILITIES-7.70%
Centrais Eletricas
Brasileiras S.A. ON..... 17,005,166 4,572,419
Centrais Eletricas
Brasileiras S.A. PN..... 1,231,761 352,054
Centrais Eletricas de
Santa Catarin PN+....... 1,509,300 1,412,879
Companhia Energetica de
Minas Gerais PN......... 77,452,143 2,059,426
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
Companhia Paulista de
Forca e Luz ON+......... 34,217,450 $ 3,134,995
-----------
11,531,773
-----------
TOTAL BRAZIL (Cost $37,705,041)......... 41,081,873
-----------
CHILE-23.67%
BANKING-2.88%
Banco de Credito e
Inversiones............. 443,129 3,818,125
Banco Osorno y La Union,
Class A................. 5,783,975 342,097
BiceCorp S.A............. 37,029 153,217
-----------
4,313,439
-----------
CONSUMER DURABLES-0.01%
Companias Cic S.A........ 57,385 12,152
-----------
CONSUMER GOODS-0.56%
Bata Chile S.A........... 898,387 111,519
Compania Tecno Industrial
S.A..................... 17,883,587 729,098
-----------
840,617
-----------
ELECTRIC DISTRIBUTION-3.10%
Empresas Emel S.A........ 53,155 1,151,465
Enersis S.A.............. 3,585,787 2,142,657
Sociedad Austral de
Electricidad S.A........ 57,500 1,350,554
-----------
4,644,676
-----------
ELECTRIC GENERATION-1.90%
Empresa Electrica
Pilmaiquen S.A.......... 366,108 343,073
Empresa Nacional de
Electricidad S.A........ 2,536,553 1,753,392
Empresa Nacional de
Electricidad S.A. ADS... 34,900 750,350
-----------
2,846,815
-----------
ENGINEERING & CONSTRUCTION-0.84%
Besalco S.A.............. 60,426 386,073
Maderas y Sinteticos
Sociedad Anonima........ 950,400 534,361
</TABLE>

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9
<PAGE>
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THE LATIN AMERICA EQUITY FUND, INC.

Forestal Terranova....... 596,502 $ 784,011
-----------
3,773,188
-----------
INSURANCE-0.16%
Compania de Seguros La
Prevision Vida S.A...... 217,878 243,943
-----------
MACHINERY & ELECTRIC-0.50%
Madeco S.A. NPV ADR...... 26,400 742,500
-----------
MINING-0.72%
Antofagasta Holdings
P.L.C................... 199,000 989,269
Sociedad Punta del Cobre
S.A., Class A........... 758 84,868
-----------
1,074,137
-----------
PACKAGING-0.13%
Envases del Pacifico
S.A..................... 303,788 198,163
-----------
PHARMACEUTICALS-0.73%
Laboratorio Chile S.A.... 1,653,600 1,098,778
-----------
STEEL-1.00%
Compania de Aceros del
Pacifico S.A............ 391,283 1,504,751
-----------
TELECOMMUNICATIONS-0.86%
Empresa Nacional de
Telecomunicaciones
S.A..................... 133,834 1,286,709
-----------
WHOLESALE-0.01%
Zona Franca de Iquique
S.A..................... 44,365 22,461
-----------
TOTAL CHILE (Cost $19,256,453).......... 35,457,314
-----------
COLOMBIA-1.62%
BANKING-1.03%
Banco de Bogota.......... 134 709
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Banco de Colombia, Senior
Subordinated Convertible
Note, 5.20%,
02/01/99++.............. USD 1,200 1,083,000
</TABLE>

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10
<PAGE>
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THE LATIN AMERICA EQUITY FUND, INC.

MEXICO-16.15%
CEMENT-2.65%
Cementos Apasco, S.A. de
C.V..................... 280,660 $ 1,554,083
Cementos Mexicanos, S.A.
de C.V., Class B........ 122,000 481,727
Cementos Mexicanos, S.A.
de C.V. CPO............. 538,000 1,929,281
-----------
3,965,091
-----------
ENGINEERING & CONSTRUCTION-1.39%
Corporacion GEO, S.A. de
C.V. ADR+,++............ 74,300 1,290,963
Corporacion GEO, S.A. de
C.V., Series B+......... 178,160 791,561
-----------
2,082,524
-----------
FOOD & BEVERAGES-2.94%
Grupo Industrial Maseca,
S.A. de C.V., Series
B....................... 1,809,000 1,888,897
Grupo Modelo, S.A. de
C.V., Series C.......... 448,000 2,096,770
Sigma Alimentos, S.A. de
C.V., Class A1+......... 46,000 409,361
-----------
4,395,028
-----------
HOLDING COMPANIES-3.08%
Corporacion Industrial
SanLuis, S.A. de C.V.
CPO..................... 527,958 3,243,618
Grupo Carso, S.A. de
C.V., Class A1+......... 193,000 1,371,483
-----------
4,615,101
-----------
MANUFACTURING-0.51%
Elamex, S.A. de C.V.+.... 76,000 760,000
-----------
MINING-0.45%
Grupo Mexico, S.A. de
C.V., Class B+.......... 227,000 674,865
-----------
PAPER PRODUCTS-1.28%
Kimberly Clark de Mexico,
S.A. de C.V., Class A... 105,100 1,919,097
-----------
</TABLE>

- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

TELECOMMUNICATIONS-1.78%
Telefonica del Peru S.A.,
Class B................. 1,118,579 $ 2,271,040
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Tele 2000 S.A.,
Convertible Note, 9.75%,
04/14/97++.............. USD 410 397,700
-----------
2,668,740
-----------
TOTAL PERU (Cost $7,590,025)............ 10,331,710
-----------
PUERTO RICO-1.06%
TELECOMMUNICATIONS-1.06%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Cellular Communications
of Puerto Rico, Inc.+
(Cost $807,249)......... 48,700 1,582,750
-----------
VENEZUELA-0.55%
FINANCIAL SERVICES-0.33%
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Global Investment
Financial Corp.,
Convertible Note,
11.00%, 03/19/01........ USD 500 500,000
-----------
FOOD & BEVERAGES-0.00%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Mavesa S.A. ADR++........ 14 55
-----------
TELECOMMUNICATIONS-0.22%
Venworld
Telecommunications*+=/=... 40,161 334,549
-----------
TOTAL VENEZUELA (Cost $1,317,164)....... 834,604
-----------
TOTAL EQUITY OR EQUITY-LINKED SECURITIES
(Cost $105,937,071).................... 132,148,869
-----------
</TABLE>

- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
Description (000) (Note A)
- -----------------------------------------------------
<S> <C> <C>
FIXED OR FLOATING RATE INVESTMENTS-3.93%
ARGENTINA-0.00%
Republic of Argentina,
Bocon Pre 2 PIK, FRN,
5.8125%, 04/01/01 (Cost
$399) (b)............... USD 0 $ 500
-----------
BRAZIL-3.93%
Federal Republic of
Brazil IDU, Series A,
6.37%, 01/01/01 (Cost
$5,514,012)............. 6,278 5,885,156
-----------
TOTAL FIXED OR FLOATING RATE INVESTMENTS
(Cost $5,514,411)...................... 5,885,656
-----------
SHORT-TERM INVESTMENTS-0.37%
CHILEAN INFLATION-ADJUSTED
TIME DEPOSITS-0.16%
<CAPTION>
Units (000)
-------------
<S> <C> <C>
Banco de O'Higgins,
7.20%, 09/16/96** (Cost
$244,230)............... CLP 8 243,398
-----------

<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
CHILEAN MUTUAL FUNDS-0.21%
Fondo Mutuo Bonosorno
Global.................. 25,371 $ 99,732
Fondo Mutuo Operacional
BanChile................ 19,148 206,356
-----------
TOTAL CHILEAN MUTUAL FUNDS (Cost
$303,468).............................. 306,088
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost
$547,698).............................. 549,486
-----------

TOTAL INVESTMENTS-92.55%
(Cost $111,999,180) (Notes A,D)........ 138,584,011
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES-7.45%...................... 11,152,282
-----------
NET ASSETS-100.00%...................... $149,736,293
-----------
-----------
- ---------------------------------------------------------
@ Subsequent to June 30, 1996, certain events took
place that indicated an impairment to the carrying
value of this security. Effective July 25, 1996, the
estimated fair value of this investment is $265,041.
* Not readily marketable security.
** Effective yield on the date of purchase.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers."
=/= Restricted security (See Note F).
(a) With an additional 59,382,000 warrants attached,
expiring 06/30/11, with no market value.
(b) Adjustable rate; rate resets based on one-month
London Interbank Offered Rate (LIBOR).
ADR American Depositary Receipts.
ADS American Depositary Shares.
CLP Chilean Pesos.
FRN Floating Rate Notes.
GDR Global Depositary Receipts.
IDU Interest Due Bond.
ON Ordinary Shares.
PIK Payment-in-kind.
PN Preferred Shares.
PNB Preferred Shares, Class B.
USD United States Dollars.
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$111,999,180) (Note A)................. $138,584,011
Cash (including $15,539 of foreign
currencies with a cost of $15,542)
(Note A)............................... 10,107,996
Receivables:
Investments sold...................... 2,142,147
Dividends............................. 282,854
Interest.............................. 304,784
Prepaid expenses and other assets....... 40,705
------------
Total Assets............................ 151,462,497
------------

LIABILITIES
Payables:
Investments purchased................. 1,155,562
Advisory fees (Note B)................ 379,638
Administration fees (Note B).......... 39,159
Other accrued expenses................ 151,845
------------
Total Liabilities....................... 1,726,204
------------
NET ASSETS (applicable to 8,597,398
shares of common stock outstanding)
(Note C)............................... $149,736,293
------------
------------

NET ASSET VALUE PER SHARE ($149,736,293
DIVIDED BY 8,597,398)................. $17.42
------------
------------

NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
8,597,398 shares issued and outstanding
(100,000,000 shares authorized)........ $ 8,597
Paid-in capital......................... 132,502,463
Undistributed net investment income..... 1,892,226
Accumulated net realized loss on
investments and foreign currency
related transactions................... (11,246,482)
Net unrealized appreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... 26,579,489
------------
Net assets applicable to shares
outstanding............................ $149,736,293
------------
------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 2,201,083
Interest.............................. 492,157
Less: Foreign taxes withheld.......... (134,930)
-----------
Total Investment Income............... 2,558,310
-----------
Expenses:
Investment advisory fees (Note B)..... 848,546
Custodian fees........................ 108,810
Administration fees (Note B).......... 102,197
Audit and legal fees.................. 30,738
Printing.............................. 27,673
Accounting fees....................... 27,590
Amortization of organizational
costs................................ 19,905
Insurance............................. 17,468
Directors' fees....................... 13,961
Transfer agent fees................... 9,241
NYSE listing fees..................... 8,063
Other................................. 1,760
-----------
Total Expenses........................ 1,215,952
-----------
Less: Fee waivers (Note B)............ (74,851)
Net Expenses........................ 1,141,101
-----------
Net Investment Income................. 1,417,209
-----------

NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FORIEGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 580,483
Foreign currency related
transactions......................... (162,907)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... 19,524,400
-----------
Net realized and unrealized gain on
investments and foreign currency
related transactions................... 19,941,976
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $21,359,185
-----------
-----------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Six Months For the Year
Ended June 30, 1996 Ended
(unaudited) December 31, 1995
<S> <C> <C>
---------------------------------------

INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 1,417,209 $ 551,342
Net realized gain/(loss) on
investments and foreign currency
related transactions................. 417,576 (11,551,955)
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... 19,524,400 (12,583,670)
------------------- -----------------
Net increase/(decrease) in net
assets resulting from operations... 21,359,185 (23,584,283)
------------------- -----------------
Dividends and distributions to
shareholders:
Net investment income................. -- (46,502)
Net realized gain on investments...... -- (2,015,530)
------------------- -----------------
Total dividends and distributions to
shareholders....................... -- (2,062,032)
------------------- -----------------
Capital share transactions (Note C):
Proceeds from 50,687 shares issued in
reinvestment of dividends............ -- 819,530
Reduction of offering costs charged to
capital.............................. -- 75,659
------------------- -----------------
Net increase in net assets resulting
from capital share transactions.... -- 895,189
------------------- -----------------
Total increase/(decrease) in net
assets............................. 21,359,185 (24,751,126)
------------------- -----------------

NET ASSETS
Beginning of period..................... 128,377,108 153,128,234
------------------- -----------------
End of period (including undistributed
net investment income of $1,892,226 and
$475,017, respectively)................ $149,736,293 $128,377,108
------------------- -----------------
------------------- -----------------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
For the Six Months For the Period
Ended For the Years Ended December 31, October 30, 1991*
June 30, 1996 ------------------------------------------- through
(unaudited) 1995 1994+ 1993+ 1992 December 31, 1991
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period........................... $14.93 $17.92 $22.50 $14.37 $15.44 $13.85**
---------- -------- -------- -------- ------- --------
Income from investment operations:
Net investment income.............. 0.17 0.06 0.01 0.11 0.21 0.06
Net realized and unrealized
gain/(loss) on investments and
foreign
currency related transactions.... 2.32 (2.81) 0.96 8.75 0.43 1.60
---------- -------- -------- -------- ------- --------
Net increase/(decrease) in net
assets resulting from
operations....................... 2.49 (2.75) 0.97 8.86 0.64 1.66
---------- -------- -------- -------- ------- --------
Dividends and distributions to
shareholders:
Net investment income............ -- -- (0.17) -- (0.21) (0.06)
Net realized gain on investments
and foreign
currency related
transactions.................... -- (0.24) (3.10) (0.75) (1.32) (0.01)
In excess of net realized gain... -- -- -- -- (0.18) --
---------- -------- -------- -------- ------- --------
Total dividends and distributions
to shareholders.................. -- (0.24) (3.27) (0.75) (1.71) (0.07)
---------- -------- -------- -------- ------- --------
Effect of reversal of accrued
offering costs................... -- -- -- 0.02 -- --
Dilution due to capital share
rights offering.................. -- -- (2.28) -- -- --
---------- -------- -------- -------- ------- --------
Net asset value, end of period..... $17.42 $14.93 $17.92 $22.50 $14.37 $15.44
---------- -------- -------- -------- ------- --------
---------- -------- -------- -------- ------- --------
Market value, end of period........ $15.125 $12.875 $17.625 $25.625 $14.000 $13.500
---------- -------- -------- -------- ------- --------
---------- -------- -------- -------- ------- --------
Total investment return(a)......... 17.48% (25.65)% (17.78)% 89.35% 16.49% (2.73)%
---------- -------- -------- -------- ------- --------
---------- -------- -------- -------- ------- --------

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)......................... $149,736 $128,377 $153,128 $135,573 $86,359 $92,751
Ratio of expenses to average net
assets(d)........................ 1.64%(b) 1.81% 1.70% 2.00% 2.20% 2.35%(b)
Ratio of expenses to average net
assets,
excluding fee waivers and
including taxes (if any)......... 1.75%(b) 2.15% -- -- -- --
Ratio of net investment income to
average net assets............... 2.04%(b) 0.64% 0.28% 0.63% 1.27% 2.46%(b)
Portfolio turnover rate............ 23.61%(c) 27.05% 68.46% 49.48% 68.70% 11.58%(c)
Average commission rate per
share(e)......................... $0.0011 -- -- -- -- --
</TABLE>

- ---------------------------------------------------------------------------
* Commencement of investment operations.
** Initial public offering price of $15.00 per share less underwriting
discount of $1.05 per share and offering expenses of $0.10 per share.
+ Based on average shares outstanding.
(a) Total investment return at market value is based on the changes in
market price of a share during the period and assumes reinvestment of
dividends and distributions, if any, at actual prices pursuant to the
Fund's Dividend Reinvestment Plan. Total investment return does not
reflect brokerage commissions or initial underwriting discounts and
has not been annualized. Total investment returns have been restated
to reflect the reinvestment of dividends and distributions, if any, on
the ex-dividend date.
(b) Annualized.
(c) Not Annualized.
(d) Ratios reflect actual expenses incurred by the Fund. Amounts are net
of fee waivers and inclusive of taxes.
(e) Disclosure is required for fiscal years beginning on or after
September 1, 1995.

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

NOTE A. SIGNIFICANT ACCOUNTING POLICIES

The Latin America Equity Fund, Inc. (the "Fund") was incorporated in Maryland on
September 16, 1991 and commenced investment operations on October 30, 1991. The
Fund is registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company. Significant
accounting policies are as follows:

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the last sales price or lacking any sales, at the
closing price last quoted for the securities (but if bid and asked quotations
are available, at the mean between the current bid and asked prices). Securities
that are traded over-the-counter are valued at the mean between the current bid
and the asked prices, if available. All other securities and assets are valued
at fair value as determined in good faith by the Board of Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The preparation of financial statements requires the use of
estimates by management including valuation of non-publicly traded securities.
Accordingly, the Board of Directors has established general guidelines for
calculating fair value of non-publicly traded securities. At June 30, 1996, the
Fund held 6.52% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $9,035,270 and fair value of
$9,757,958. The net asset value per share of the Fund is calculated weekly, at
the end of each month and at any other times determined by the Board of
Directors.

CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At June 30, 1996, the interest
rate was 4.6875%, which resets on a daily basis. Amounts on deposit are
generally available on the same business day.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and U.S.
federal income tax purposes. Interest income is recorded on an accrual basis;
dividend income is recorded on the ex-dividend date.

TAXES: No provision is made for U.S. federal income or excise tax as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.

At December 31, 1995, the Fund had a capital loss carryover of $7,132,493 which
expires in 2003.

For U.S. federal income tax purposes, realized capital losses and foreign
exchange losses incurred after October 31, 1995, within the fiscal year, are
deemed to arise on the first day of the following fiscal year. The Fund incurred
and elected to defer realized capital losses of $4,434,331.

Income received by the Fund from sources within Latin America may be subject to
withholding and other taxes imposed by Latin American countries. Also, certain
Latin American countries impose taxes on funds remitted or repatriated from such
countries.

The Fund is subject to a 10% Chilean repatriation tax with respect to all
remittances from Chile in excess of original invested capital. For the six
months ended June 30, 1996, the Fund incurred no such tax.

FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:

- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------

(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and

(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.

The Fund does not isolate that portion of gains and losses in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency denominated debt obligations
pursuant to U.S. federal income tax regulations, with such amount categorized as
foreign exchange gain or loss for both financial reporting and U.S. federal
income tax reporting purposes.

The Fund reports certain foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for U.S. federal income tax purposes.

Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/depreciation on investments, foreign currency holdings,
and other assets and liabilities denominated in foreign currencies.

Net realized foreign exchange losses represent foreign exchange gains and losses
from sales and maturities of debt securities, transactions in foreign currencies
and forward foreign currency contracts, exchange gains or losses realized
between the trade date and settlement date on security transactions, and the
difference between the amounts of interest and dividends recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received.

DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders, substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates.

Some countries require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors. In
addition, if there is a deterioration in a country's balance of payments or for
other reasons, a country may impose temporary restrictions on foreign capital
remittances abroad. Amounts repatriated prior to the end of specified periods
may be subject to taxes as specified in the Fund's prospectus.

- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------

The Latin American securities markets are substantially smaller, less liquid and
more volatile than the major securities markets in the United States.
Consequently, acquisition and disposition of securities by the Fund may be
inhibited. A significant proportion of the aggregate market value of equity
securities listed on the major securities exchange are held by a small number of
investors. This may limit the number of shares for acquisition or disposition by
the Fund.

The Fund, subject to local investment limitations, may invest up to 10% of its
assets in non-publicly traded equity securities which may involve a high degree
of business and financial risk and may result in substantial losses. Because of
the current absence of any liquid trading market for these investments, the Fund
may take longer to liquidate these positions than would be the case for publicly
traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded.

The Fund is permitted to engage in the trading of sovereign debt of Latin
American countries which involves a high degree of risk. The issuer of the debt
or the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal and/or interest when due in accordance
with the terms of such debt. Sovereign debt in which the Fund will invest is
widely considered to have a credit quality below investment grade as determined
by U.S. rating agencies. As a result, sovereign debt may be regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involves
major risk exposure to adverse conditions.
NOTE B. AGREEMENTS

BEA Associates ("BEA") serves as the Fund's investment adviser, with respect to
all investments. As compensation for its advisory services, BEA receives from
the Fund an annual fee, calculated weekly and paid quarterly, equal to 1.25% of
the first $100 million of the Fund's average weekly net assets, 1.15% of the
next $50 million of the Fund's average weekly net assets and 1.05% of the Fund's
average weekly net assets in excess of $150 million. BEA has agreed to waive its
portion of the advisory fee previously payable to Merchant Bankers Asociados
S.A., Patrimonio Planejamento Financeiro Ltda., and Acci Worldwide, S.A. de C.V.
(collectively, the "Sub-Advisers"), who had been employed by the Fund as
sub-advisers through March 1, 1994, August 15, 1994, and November 16, 1994,
respectively. For the six months ended June 30, 1996, BEA earned $848,546 for
advisory services, of which BEA waived $74,851 in advisory fees previously
payable to its Sub-Advisers. BEA also provides certain administrative services
to the Fund and is reimbursed by the Fund for costs incurred on behalf of the
Fund. For the six months ended June 30, 1996, BEA was reimbursed $5,483 for
administrative services rendered to the Fund.

Celfin Servicios Financieros Limitada (formerly Celfin Agente de Valores
Limitada) ("Celfin") serves as the Fund's sub-adviser with respect to Chilean
investments. In return for its services, Celfin is paid a fee out of the
advisory fees payable to BEA, computed weekly and paid quarterly at an annual
rate of 0.25% of the Fund's average weekly net assets invested in Chile. For the
six months ended June 30, 1996, Celfin earned $39,699 for sub-advisory services.

Bear Stearns Funds Management Inc. ("BSFM") serves as the Fund's U.S.
administrator. The Fund pays BSFM a monthly fee for its services rendered that
is computed weekly at an annual rate of 0.10% of the first $100 million of the
Fund's average weekly net assets and

- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
0.08% of amounts in excess of $100 million. For the six months ended June 30,
1996, BSFM earned $65,507 for administrative services.

BEA Administration, Administradora de Fondos de Inversion de Capital Extranjero
S.A. ("AFICE") serves as the Fund's Chilean administrator. For its services,
AFICE is paid an annual fee by the Fund equal to the greater of 2,000 U.F.'s
(approximately $63,300 at June 30, 1996) or 0.10% of the Fund's average weekly
net assets invested in Chile and an annual reimbursement of out-of-pocket
expenses not to exceed 500 U.F.'s. Such fees are paid by AFICE to Celfin for
certain administrative services. An accounting fee is also paid to Celfin which
is calculated and paid quarterly at an annual rate of 205.32 U.F.'s
(approximately $6,500 at June 30, 1996). For the six months ended June 30, 1996,
Celfin was paid $31,207 and $3,225 for administrative and accounting services,
respectively.
NOTE C. CAPITAL STOCK

The authorized capital stock of the Fund is 100,000,000 shares of common stock,
$0.001, par value. Of the 8,597,398 shares outstanding at June 30, 1996, BEA
owned 7,169 shares.
NOTE D. INVESTMENT IN SECURITIES

For U.S. federal income tax purposes, the cost of securities owned at June 30,
1996 was $112,096,414. Accordingly, the net unrealized appreciation of
investments (including investments denominated in foreign currencies) of
$26,487,597, was composed of gross appreciation of $37,389,308 for those
investments having an excess of value over cost and gross depreciation of
$10,901,711 for those investments having an excess of cost over value.

For the six months ended June 30, 1996, purchases and sales of securities, other
than short-term obligations, aggregated $31,441,273 and $34,226,893,
respectively.
NOTE E. CREDIT AGREEMENT

The Fund, along with 17 other U.S. registered management investment companies
for which BEA serves as investment adviser, has a credit agreement with The
First National Bank of Boston. The agreement provides that each fund is
permitted to borrow an amount equal to the lesser of $50,000,000 or 25% of the
net assets of the fund. However, at no time shall the aggregate outstanding
principal amount of all loans to any of the 18 funds exceed $50,000,000. The
line of credit will bear interest at (i) the greater of the bank's prime rate or
the Federal Funds Effective Rate plus 0.50% or (ii) the Adjusted Eurodollar Rate
plus 1.50%. The Fund had no amounts outstanding under the credit agreement
during the six months ended June 30, 1996.

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21
<PAGE>
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THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------

NOTE F. RESTRICTED SECURITIES

Certain of the Fund's investments are restricted as to resale and are valued at
the direction of the Fund's Board of Directors in good faith, at fair value,
after taking into consideration appropriate indications of value. The table
below shows the number of shares held, the acquisition dates, aggregate cost,
fair value as of June 30, 1996, share value of such security and percentage of
net assets which the security comprises.

<TABLE>
<CAPTION>
FAIR VALUE
NUMBER AT JUNE 30, VALUE PERCENTAGE OF
SECURITY OF SHARES ACQUISITION DATES COST 1996 PER SHARE NET ASSETS
- ------------------------------------- ----------- ------------------- ---------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications 40,160 7/30/92 & 8/07/92 $ 817,105 $ 334,549 $ 8.33 0.22
</TABLE>

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22
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)

On April 23, 1996, the annual meeting of shareholders of The Latin America
Equity Fund, Inc. (the "Fund") was held and the following matters were voted
upon:

(1) To re-elect five directors to the Board of Directors of the Fund.

<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Enrique R. Arzac* 6,488,683 196,865 1,911,850
Peter A. Gordon 6,480,180 205,368 1,911,850
Daniel Sigg 6,472,109 213,439 1,911,850
Martin M. Torino 6,476,544 209,004 1,911,850
Richard Watt 6,477,606 207,942 1,911,850
</TABLE>

- --------------
* On February 13, 1996, the Board of Directors increased the size of the Fund's
Board of Directors to 8 and Dr. Enrique R. Arzac was elected to fill the newly
created vacancy. The election of Dr. Arzac was submitted to the Fund's
shareholders for their ratification at the annual meeting of shareholders.

In addition to the directors re-elected at the meeting, Emilio Bassini, James J.
Cattano and George W. Landau continue to serve as directors of the Fund.

(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the year ending December 31, 1996.

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
6,525,578 116,852 43,118 1,911,850
</TABLE>

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23
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

Pursuant to The Latin America Equity Fund, Inc.'s (the "Fund") Dividend
Reinvestment and Cash Purchase Plan (the "Plan"), each shareholder will be
deemed to have elected, unless the Fund's transfer agent, as the Plan Agent (the
"Plan Agent"), is otherwise instructed by the shareholder in writing, to have
all distributions, net of any applicable U.S. withholding tax, automatically
reinvested in additional shares of the Fund. Shareholders who do not participate
in the Plan will receive all dividends and distributions in cash, net of any
applicable U.S. withholding tax, paid in dollars by check mailed directly to the
shareholder by the Plan Agent, as dividend-paying agent. Shareholders who do not
wish to have dividend and distributions automatically reinvested should notify
the Plan Agent for the Fund, at the address set forth below. Dividends and
distributions with respect to shares registered in the name of a broker-dealer
or other nominee (i.e., in "street name") will be reinvested under the Plan
unless such service is not provided by the broker or nominee or the shareholder
elects to receive dividends and distributions in cash. A shareholder whose
shares are held by a broker or nominee that does not provide a dividend
reinvestment program may be required to have his shares registered in his own
name to participate in the Plan. Investors who own shares of the Fund's common
stock registered in street name should contact the broker or nominee for details
concerning participation in the Plan.

Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain foreign issuers are subject to
taxes payable by the Fund at the time amounts are remitted. Such taxes, if any,
will be borne by the Fund and allocated to all shareholders in proportion to
their interests in the Fund.

The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Board of Directors of the Fund declares an income dividend or a capital
gains distribution payable either in the Fund's common stock or in cash, as
shareholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive common stock to be issued by the Fund.
If the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new share to the participants
valued at net asset value or, if the net asset value is less than 95% of the
market price on the valuation date, then valued at 95% of the market price. If
net asset value per share on the valuation date exceeds the market price per
share on that date, participants in the Plan will receive shares of stock from
the Fund valued at the market price.

The valuation date is the dividend or distribution payment date or, if that date
is not a New York Stock Exchange trading day, the next preceding trading day. If
the Fund should declare an income dividend or capital gains distributions
payable only in cash, the Plan Agent will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere, for
the participants' accounts on, or shortly after, the payment date.

Participants in the Plan have the option of making additional cash payments to
the Plan Agent, semi-annually, in any amount from $100 to $3,000, for investment
in the Fund's common stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about February 15
and August 15 of each year. Any voluntary cash payments received more than 30
days prior to these dates will be returned by the Plan Agent and interest will
not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately 10 days before February 15 or August
15, as the case may be. A participant may withdraw a voluntary cash payment by
written notice, if the notice is received by the Plan Agent not less than 48
hours before the payment is to be

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24
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)

invested. A participant's tax basis in his shares acquired through his optional
investment right will equal his cash payments to the Plan, including any cash
payments used to pay brokerage commissions allocable to his acquired shares.

The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.

In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for other who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.

There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock of in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
and capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase of the Fund's common stock on his own behalf.

The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends or distributions.

Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to the members of the Plan at
least 30 days before the semi-annual contribution date, in the case of voluntary
cash payments, or the record date for dividends or distributions. The Plan also
may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days written notice to members of the Plan. All
correspondence concerning the Plan should be directed to The First National Bank
of Boston, Investor Relations Department, P.O. Box 644, Mail Stop 45-02-09,
Boston, Massachusetts 02102-0644 or by telephone at 1-800-730-6001.

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25
<PAGE>

SUMMARY OF GENERAL INFORMATION

The Fund--The Latin America Equity Fund, Inc.--is a closed-end,
non-diversified management investment company whose shares trade on the New
York Stock Exchange. Its investment objective is long-term capital
appreciation through investments primarily in Latin American equity
securities. The Fund is managed and advised by BEA Associates ("BEA"). BEA is
a diversified asset manager, handling equity, balanced, fixed income,
international and derivative based accounts. Portfolios include international
and emerging market investments, common stocks, taxable and non-taxable
bonds, options, futures and venture capital. BEA manages money for corporate
pension and profit-sharing funds, public pension funds, union funds,
endowments and other charitable institutions and private individuals. As of
June 30, 1996, BEA managed approximately $28.7 billion in assets. BEA also
advises eight other international closed-end funds: The Brazilian Equity
Fund, Inc., The Chile Fund, Inc., The First Israel Fund, Inc., The Emerging
Markets Infrastructure Fund, Inc., The Emerging Markets Telecommunications
Fund, Inc., The Indonesia Fund, Inc., The Latin America Investment Fund, Inc.
and The Portugal Fund, Inc.

SHAREHOLDER INFORMATION

The market price is published in: THE NEW YORK TIMES (daily) under the
designation "LatAEqt" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "LatinAmEqty". The Fund's New York Stock
Exchange trading symbol is LAQ. Weekly comparative net asset value (NAV) and
market price information about The Latin America Equity Fund, Inc.'s shares
are published each Sunday in THE NEW YORK TIMES and each Monday in THE WALL
STREET JOURNAL and BARRON'S, as well as other newspapers, in a table called
"Closed End Funds."

To request an annual report, or to be placed on the Fund's mailing list,
shareholders should call 1-800-293-1232.

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN-SUMMARY

An automatic Dividend Reinvestment and Cash Purchase Plan (the "Plan") is
available to provide shareholders with automatic reinvestment of their
dividend income and capital gain distributions in additional shares of the
Fund's common stock.

As per the Plan, each shareholder will be automatically reinvested in
additional shares of the Fund by The First National Bank of Boston, unless
otherwise instructed by the shareholder in writing. Shareholders who do not
participate in the Plan will receive all dividends and distributions in cash
paid by check in U.S. dollars. Shares registered in street name will be
reinvested under the Plan, unless the broker-dealer or other nominee does not
provide a dividend reinvestment plan or the shareholder elects to receive
their dividends in cash.

<PAGE>

DIRECTORS AND CORPORATE OFFICERS

Emilio Bassini Chairman of the Board
of Directors, President
and Chief Investment Officer
Enrique R. Arzac Director
James J. Cattano Director
Peter A. Gordon Director
George W. Landau Director
Daniel Sigg Director and
Senior Vice President
Martin M. Torino Director
Richard Watt Director,
Senior Vice President
and Investment Officer
Paul P. Stamler Senior Vice President
Michael A. Pignataro Chief Financial Officer
and Secretary
Rachel D. Manney Vice President and Treasurer

INVESTMENT ADVISER

BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022

ADMINISTRATOR

Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167

CUSTODIAN

Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109

SHAREHOLDER SERVICING AGENT

The First National Bank of Boston
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103

LEGAL COUNSEL

Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022

This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without examination by
independent accountants who do not express an opinion thereon. It is not a
prospectus, circular or representation intended for use in the purchase or
sale of shares of the Fund or of any securities mentioned in this report.

[LAQ LISTED NYSE LOGO]
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