LATIN AMERICA EQUITY FUND INC, N-30D, 1998-09-01

LATIN AMERICA EQUITY FUND INC
N-30D, 1998-09-01

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<PAGE>

The Latin America
Equity Fund, Inc.

-----------------

SEMI-ANNUAL REPORT
JUNE 30, 1998
<PAGE>
CONTENTS

<TABLE>
<S> <C>
Letter to Shareholders....................................................................... 1

Portfolio Summary............................................................................ 7

Schedule of Investments...................................................................... 9

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.................................................... 22

Description of Dividend Reinvestment and Cash Purchase Plan.................................. 23
</TABLE>

PICTURED ON THE COVER IS CHICHEN ITZA, ONE OF THE BEST KNOWN AND MOST IMPRESSIVE
OF THE MAYAN RUINS IN MEXICO. CHICHEN ITZA TRANSLATES TO MEAN "MOUTH OF THE WELL
OF ITZA".

- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
August 3, 1998

DEAR SHAREHOLDER:

I am writing to report on the activities of The Latin America Equity Fund, Inc.
(the "Fund") for the six months ended June 30, 1998.

At June 30, 1998, the Fund's net assets were $115.6 million. The Fund's net
asset value ("NAV") was $13.40 per share, as compared to $17.22 at December 31,
1997.

PERFORMANCE

For the period January 1, 1998 through June 30, 1998, the Fund's total return,
based on NAV fell 22.2%. By comparison, the total return of the Morgan Stanley
Capital International Emerging Markets Latin America Free Index ("EMFLA")
declined 19.8%.

The Fund underperformed the EMFLA benchmark during the period due to a
combination of two factors. First was one of the portfolio's private equity
holdings, International Wireless Communications, Inc. ("IWC"), which develops,
owns and operates local wireless telecommunications systems in Latin America and
Asia. IWC needs substantial capital to finance the build-out of its
infrastructure and has experienced difficulty in raising adequate capital in
recent months. The level of such difficulty was high enough that the Fund was
compelled to write down much of the value of its IWC securities in June.

The second main contributor to underperformance was stock selection in Mexico. I
have maintained a higher-than-average level of exposure to Mexican conglomerates
like Grupo Carso, S.A. de C.V. and Desc, S.A. de C.V., which I consider to be
strong plays on the Mexican economy. These were hurt, however, by the perception
that their exports to Asia would suffer as the Asian macroeconomic picture
deteriorated.

INVESTMENT PERSPECTIVE

The first half of 1998 has been very difficult for most emerging equity markets.
Although Latin American markets outperformed relative to the battered markets of
Asia, they still performed poorly on an absolute basis. Several developments
negatively impacted Latin equities during the period:

ADVERSE FLOW OF FUNDS. As the chart below indicates, the flow of investor funds
into Latin equities has been overwhelmingly negative since July 1997. This is a
clear indication that investor sentiment is decidedly pessimistic.

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1
<PAGE>
LETTER TO SHAREHOLDERS

CASH FLOWING OUT OF LATIN AMERICAN EQUITY FUNDS
(Weekly and 4-week moving average, $ billions, June 1997-June 1998)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
WEEKLY FLOWS 4-WEEK MOVING AVERAGE
<S> <C> <C>
6/11/97 37991 30940
6/18/97 81806 47295
6/25/97 68364 57782
7/2/97 58493 61663
7/9/97 119572 82059
7/16/97 -12043 58596
7/23/97 -184964 -4736
7/30/97 56074 -5340
8/6/97 16035 -31225
8/13/97 -5706 -29640
8/20/97 -6732 14918
8/27/97 -37675 -8519
9/3/97 -51943 -25514
9/10/97 2860 -23372
9/17/97 -46433 -33298
9/24/97 -2362 -24469
10/1/97 8627 -9327
10/8/97 7835 -8083
10/15/97 -9386 1179
10/22/97 1918 2248
10/29/97 -143463 -35774
11/5/97 -26191 -44281
11/12/97 -41560 -52324
11/19/97 -109741 -80239
11/25/97 -9173 -46666
12/3/97 38083 -30598
12/10/97 -14422 -23813
12/17/97 -43635 -7287
12/23/97 -67900 -21968
12/30/97 47952 -19501
1/7/98 -16015 -19900
1/14/98 -35964 -17982
1/21/98 -11185 -3803
1/28/98 -14456 -19405
2/4/98 -36744 -24587
2/11/98 -49748 -28033
2/18/98 -28930 -32470
2/25/98 -28755 -36044
3/4/98 -70986 -44605
3/11/98 -44748 -43355
3/18/98 2943 -35387
3/25/98 -26173 -34741
4/1/98 -53697 -30419
4/8/98 -37425 -28588
4/15/98 -40221 -39379
4/22/98 -14660 -36501
4/29/98 -25587 -29473
5/6/98 -85278 -41437
5/13/98 -68767 -48573
5/20/98 -21074 -50177
5/27/98 -27614 -50683
6/3/98 -23083 -35135
6/10/98 -47552 -29831
</TABLE>

SOURCES: AMG DATA SERVICES, BBV-LATINVEST

HEAVY SELLING IN BRAZIL AND MEXICO. Brazil and Mexico, which are by far the
largest and most liquid of the Latin equity markets, experienced heavy selling
due to local concerns as well as a "contagion" effect from Asian markets.

Local concerns in Brazil included an alarming increase in the fiscal deficit and
the eroding popularity of President Fernando Henrique Cardoso, whose re-election
is vital to the completion of the REAL economic stabilization plan. Of further
concern to investors was the government's inability to push through Congress key
Social Security reform legislation, a major ingredient in deficit reduction.
Another factor was the deaths of two important political figures. These were
Sergio Motta, the Minister of Transportation and Cardoso's top political
operative, and Luis Eduardo Magalhaes, President of Congress's Lower House and
an important Cardoso ally. Finally, there was nervousness about the
privatization process, whose success is critical, both as a significant source
of government revenues and as a vote of investors' confidence in the nation's
future growth prospects.

Mexican equities were hurt by worries over the overheating economy, which has
already caused interest rates to rise; nervousness over key upcoming state and
local elections; and the difficulties associated with democratization as the
historically dominant PRI party gradually yields power.

I also note in this context the heavy selling endured by Asian currencies and
financial markets in Japan, South Korea, Indonesia, Thailand, Malaysia and the
Philippines. Investors extended such pessimism to Brazil and Mexico, whose
currencies are considered the most vulnerable to devaluation among Latin
currencies.

DISAPPOINTING BRAZILIAN FISCAL DEFICIT. The fundamental factor affecting
investor sentiment about Brazil is concern over the uncomfortably high level of
the Brazilian fiscal deficit (I.E., an annualized rate of 6.48% of GDP at March
31, up from 6.12% of GDP at the end of 1997). As noted earlier, the inability of
the Cardoso government to pass vital Social Security reform legislation does not
bode well for the prospect of meaningful deficit reduction in 1998.

FALLING COMMODITY PRICES. Prices of major commodities have plummeted due to the
severity of Asia's problems. The health of several Latin economies is directly
reliant on stability in the prices of oil (I.E., Mexico, Venezuela, Argentina,
Colombia) and copper (i.e., Chile).

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2
<PAGE>
LETTER TO SHAREHOLDERS

OIL PRICES HAVE PLUMMETED
(Crude Oil Futures Contract, $, July 1997-June 1998)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

SOURCE: BLOOMBERG
POLITICAL ISSUES. Investor sentiment about several Latin markets was affected by
concerns over local political issues. In Brazil, these included the prospects
for Cardoso's successful re-election, the passage of fiscal reform measures and
the deaths of Motta and Magalhaes. In Argentina, periodic outbreaks of scandal
related to President Menem and uncertainty over whether he will run for
re-election caused concern. In Venezuela, there was an alarming rise in the
popularity of Hugo Chavez, a right-wing extremist running for president. There
also was the presidential election in Colombia, which was won by opposition
leader Andres Pastrana.
PORTFOLIO STRUCTURE
TOP 10 HOLDINGS, BY ISSUER*

<TABLE>
<CAPTION>
PERCENT OF
HOLDING COUNTRY NET ASSETS
<C> <S> <C> <C>
1. Telebras Brazil 8.4
2. CRT Brazil 4.2
3. Eletrobras Brazil 3.9
4. Telmex Mexico 3.8
5. Cifra Mexico 3.7
6. Kimberly-Clark de Mexico 3.4
Mexico
7. Telesp Brazil 3.4
8. CVRD Brazil 3.2
9. Cemex Mexico 3.0
10. Grupo Televisa Mexico 2.6
*Company names are abbreviations of those found in the
chart on page 8.
</TABLE>

Country Breakdown
(as a percent of net assets)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Argentina 8.49%
Brazil 39.57%
Chile 10.78%
Colombia 1.09%
Jamaica 1.30%
Mexico 27.95%
Peru 2.06%
Venezuela 1.98%
Other* 6.78%
</TABLE>

*Other includes Global, Latin America and Cash & Cash Equivalents.

Given general market conditions for Latin American equities, I am structuring
the portfolio in a defensive manner emphasizing high-quality, very liquid
blue-chip companies. Most of the top 10 holdings--Telebras, CRT, Eletrobras,
Telmex, Cifra, Kimberly-Clark de Mexico, Telesp, CVRD, Cemex and Grupo
Televisa--fit this description. Favored industry sectors include banking,
beverages and telecommunications.

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3
<PAGE>
LETTER TO SHAREHOLDERS

I would now like to discuss several companies that are representative of my
current approach to the portfolio.

UNIAO DE BANCOS BRASILEIROS S.A. ("Unibanco"), which traces its origins back to
1924, is Brazil's third-largest private bank in terms of assets and loans. Like
many large Latin American banks, its shares have sold off in recent weeks due to
the Asian contagion effect and investor concerns about the Brazilian economy. I
see Unibanco as a premier financial institution selling at a depressed valuation
for reasons that have little to do with the company itself.

BRAZILIAN BANKS UNDERVALUED
(Price/book value multiple as of 6/23/98)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Brazil 0.71
Colombia 0.86
Chile 1.58
Argentina 1.63
Mexico 1.75
Peru 2.61
Source: UBS Securities
</TABLE>

SOURCE: UBS SECURITIES

Unibanco's fundamentals are quite sound. It is diversified among four core
businesses (I.E., retail banking, commercial banking, insurance and asset
management), which is unique among Brazilian banks. This diversification offers
growth potential, a wider earnings stream and defense against economic
cyclicality. The company's financial condition is strong, its management team is
top-notch, it is committed to cost-efficiency and maintains a strict,
conservative lending policy.

CIFRA S.A. DE C.V. ("Cifra") is Mexico's preeminent retailer (in terms of scale,
technology and market presence) and one of the country's best-managed companies
in any sector. Its variety of distinct retail formats (I.E., supermarkets,
hypermarkets, department stores and restaurants) offers some measure of
defensive appeal and gives the company access to the widest consumer spectrum of
any Mexican retailer. Combined with the stock's liquidity, these characteristics
make Cifra one of the most attractive retailers in Latin America for investors.

In late 1997, Wal-Mart Stores purchased a controlling ownership stake (52%) in
Cifra. As a result, Cifra is now in the process of consolidating its own stores
with those previously owned with Wal-Mart in a 50-50 joint venture dating back
to 1991.

Given Cifra's excellent management team, sound balance sheet and conservative
operating approach, I view it as a desirable holding during a time of
uncertainty. It also is among the best plays on the resurgence of consumer
activity in Mexico.

- --------------------------------------------------------------------------------
4
<PAGE>
LETTER TO SHAREHOLDERS

COMPANHIA RIOGRANDENSE DE TELECOMUNICACOES S.A. ("CRT") is the local telecom
provider in the southern Brazilian state of Rio Grande do Sul. Although its
capitalization is relatively small, I like CRT both for its own growth prospects
and its positive effect on the valuations of other Brazilian telcos.

In mid-June, the Rio Grande do Sul government privatized CRT, selling 54% of its
common shares to the TISA international subsidiary of Telefonica de Espana
(note: TISA already owned 35%). TISA paid a premium of 27% over the government's
minimum price and 152% over the then-current market price. The success of the
CRT sale is a very positive indicator for the valuation of the assets of
Telebras (the Fund's largest holding) in its own upcoming privatization.

OUTLOOK

My outlook for Latin American equities is cautious over the next six months,
given their volatility and that of emerging equity markets more generally. I am
more optimistic about 1999, when much of the potential bad news should be behind
us.

I intend to monitor these key factors most closely:

- - The prospects for economic and/or political stabilization in Asia.

- - Volatility in the Japanese yen, whose weakness impacts Latin markets via their
exposure to any Asian contagion.

- - Local trends, particularly in Brazil, Venezuela and Colombia.

- - Political risk, both in the form of elections in Brazil, Mexico and Venezuela
and the privatization process in Brazil.

- - Developments in Russia, which have a spillover effect into other emerging
markets.

- - Commodity prices, especially those of oil and copper.

- --------------------------------------------------------------------------------
5
<PAGE>
LETTER TO SHAREHOLDERS

I expect to maintain the current strategy of emphasizing blue-chip, highly
liquid companies. I am also keeping roughly 7% of the Fund's assets in cash
reserves, which I expect to invest when prices appear to fully discount actual
and potential bad news.

Sincerely yours,

[SIG]
Richard W. Watt
President
Chief Investment Officer*

FROM BEA ASSOCIATES:

I. 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 23 through 24 of this report.

II. Like other financial and business organizations, the Fund and its portfolio
could be adversely affected if the computer systems they rely on do not
properly process date-related information and data involving the years 2000
and after. We at BEA Associates are taking steps that we believe are
reasonable to address this problem in our own computer system and are
seeking assurances that comparable steps are being taken by the Fund's other
major service providers. BEA Associates is also attempting to evaluate the
potential impact of this problem on the issues of investment securities that
the portfolio purchases. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund
and portfolio.

- --------------------------------------------------------------------------------
*Richard W. Watt, who is a Managing Director of BEA Associates, is primarily
responsible for management of the Fund's assets. He joined BEA Associates on
August 2, 1995. Mr. Watt formerly was associated with Gartmore Investment
Limited in London, where he was head of emerging markets investments and
research. Before joining Gartmore Investment Limited in 1992, Mr. Watt was a
Director of Kleinwort Benson International Investments in London, where he was
responsible for research, analysis and trading of equities in Latin America and
other regions. Mr. Watt is President, Chief Investment Officer and a Director of
the Fund. He also is President, Chief Investment Officer and a Director of The
Brazilian Equity Fund, Inc., 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.

- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
GEOGRAPHIC ASSET BREAKDOWN

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS
<S> <C> <C>
6/30/98 12/31/97
Argentina 8.49 4.70
Brazil 39.57 31.69
Chile 10.78 11.60
Colombia 1.09 0.00
Jamaica 1.30 0.91
Latin America 0.23 1.47
Mexico 27.95 38.13
Peru 2.06 3.60
Venezuela 1.98 6.99
Other 0.31 0.00
Cash & Cash Equivalents 6.24 0.91
</TABLE>

SECTOR ALLOCATION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AS A PERCENT OF NET ASSETS

<S> <C> <C>
6/30/98 12/31/97
Banking 5.31 2.13
Broadcast, Radio and Television 2.62 3.23
Cement 2.97 2.18
Conglomerates 0.81 3.31
Electric Distribution 1.05 4.12
Electric Generation 1.38 3.00
Food & Beverages 11.34 9.93
Investment & Holding Companies 5.38 4.82
Local and/or Long Distance Telephone
Service 9.28 3.07
Mining 4.66 3.53
Oil & Natural Gas 7.89 6.08
Paper Products 3.45 3.07
Retail 5.34 6.64
Telecommunications 16.72 21.96
Utilities 9.46 9.66
Fixed or Floating Rate Investments 0.23 0.00
Other 5.47 10.57
Cash & Cash Equivalents 6.64 2.70
</TABLE>

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7
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER

<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country Assets
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1. Telecomunicacoes Brasileiras S.A. Local and/or Long Distance
Telephone Service Brazil 8.4
- --------------------------------------------------------------------------------------------------------------------------------
2. Companhia Riograndense de Telecomunicacoes S.A. Telecommunications Brazil 4.2
- --------------------------------------------------------------------------------------------------------------------------------
3. Centrais Eletricas Brasileiras S.A. Utilities Brazil 3.9
- --------------------------------------------------------------------------------------------------------------------------------
4. Telefonos de Mexico, S.A. de C.V. Telecommunications Mexico 3.8
- --------------------------------------------------------------------------------------------------------------------------------
5. Cifra S.A. de C.V. Retail Mexico 3.7
- --------------------------------------------------------------------------------------------------------------------------------
6. Kimberly-Clark de Mexico, S.A. de C.V. Paper Products Mexico 3.4
- --------------------------------------------------------------------------------------------------------------------------------
7. Telecomunicacoes de Sao Paulo S.A. Telecommunications Brazil 3.4
- --------------------------------------------------------------------------------------------------------------------------------
8. Companhia Vale do Rio Doce Mining Brazil 3.2
- --------------------------------------------------------------------------------------------------------------------------------
9. Cemex, S.A. de C.V. Cement Mexico 3.0
- --------------------------------------------------------------------------------------------------------------------------------
10. Grupo Televisa S.A. Broadcast, Radio &
Television Mexico 2.6
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

SCHEDULE OF INVESTMENTS - JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- -----------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-93.13%
ARGENTINA-8.49%
INVESTMENT & HOLDING COMPANIES-1.22%
CEI Citicorp Holdings S.A., Class B..... 348,283 $ 1,410,751
--------------
OIL & NATURAL GAS-5.34%
Camuzzi Argentina S.A.*+................ 1,403,504 2,669,465
Perez Companc S.A., Class B............. 365,123 1,833,183
Sodigas del Sur S.A.*................... 421,485 783,962
Sodigas Pampeana S.A.*.................. 583,264 886,561
--------------
6,173,171
--------------
TELECOMMUNICATIONS-1.93%
Telefonica de Argentina S.A. ADR........ 68,700 2,228,456
--------------
TOTAL ARGENTINA (Cost $8,856,769)...................... 9,812,378
--------------
BRAZIL-39.57%
BANKING-3.42%
Banco do Brasil S.A., Warrants (expiring
06/30/01)+............................. 11,076,400 26,816
Banco do Brasil S.A., Warrants (expiring
06/30/06)+............................. 16,614,600 38,931
Banco do Brasil S.A., Warrants (expiring
06/30/11)+............................. 27,691,000 73,025
Banco Itau S.A. PN...................... 3,683,000 2,101,751
Uniao de Bancos Brasileiros S.A. GDR.... 58,031 1,711,915
--------------
3,952,438
--------------
BUSINESS SERVICES-0.01%
Multibras da Amazonia S.A. PN........... 28,100 11,419
--------------
CONSUMER GOODS-0.01%
Tec Toy Industria de Brinquedos S.A.
PN+.................................... 352,904,000 9,154
--------------
ELECTRIC GENERATION-0.01%
Centrais Geradoras do Sul do Brasil S.A.
ADR+................................... 6,480 8,853
--------------

<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES-3.00%
Ceval Alimentos S.A. ON+................ 160,771,340 $ 458,731
Companhia Brasileira de Distribuicao
Grupo Pao de Acucar ADR................ 118,984 2,692,013
Santista Alimentos S.A. ON.............. 458,539 317,177
--------------
3,467,921
--------------
LOCAL AND/OR LONG DISTANCE TELEPHONE SERVICE-8.45%
Telecomunicacoes Brasileiras S.A. ADR
PN..................................... 74,508 8,135,342
Telecomunicacoes Brasileiras S.A. ON.... 20,490,299 1,629,940
--------------
9,765,282
--------------
MINING-3.21%
Companhia Vale do Rio Doce ADR.......... 18,800 381,978
Companhia Vale do Rio Doce PNA+......... 167,600 3,333,016
--------------
3,714,994
--------------
OIL & NATURAL GAS-2.55%
Petroleo Brasileiro S.A. PN............. 15,868,960 2,950,003
--------------
TELECOMMUNICATIONS-8.61%
Companhia Riograndense de
Telecomunicacoes S.A., PNA............. 4,455,800 4,858,211
Telecomunicacoes de Minas Gerais S.A.
PNB(a)................................. 11,291,520 785,930
Telecomunicacoes de Sao Paulo S.A. PN... 16,098,984 3,786,195
Telecomunicacoes de Sao Paulo S.A., PN
Receipts+.............................. 756,616 177,943
Telemig Cellular S.A. PNC+.............. 11,291,520 341,709
--------------
9,949,988
--------------
TEXTILES-0.84%
Companhia Tecidos Norte de Minas S.A.... 371,223 101,107
Companhia Tecidos Norte de Minas S.A.
PN..................................... 5,639,025 853,253
</TABLE>

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

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------------------------
<S> <C> <C>
TEXTILES (CONTINUED)
Empresa Nacional de Comercio Redito e
Participacoes S.A. PN.................. 8,200,500 $ 20,562
--------------
974,922
--------------
UTILITIES-9.46%
Centrais Eletricas Brasileiras S.A.
ADR.................................... 64,800 988,855
Centrais Eletricas Brasileiras S.A.
PN..................................... 116,111,000 3,493,721
Companhia de Saneamento Basico do Estado
de Sao Paulo ON........................ 19,275,000 2,316,567
Companhia Paranaense de Energia ADR..... 10,900 100,825
Companhia Paranaense de Energia PNB..... 278,288,000 2,598,686
Light-Servicios de Eletricidade S.A..... 4,681,067 1,436,841
--------------
10,935,495
--------------
TOTAL BRAZIL (Cost $58,054,348)........................ 45,740,469
--------------
CHILE-10.37%
BANKING-1.28%
Banco de A. Edwards ADR................. 44,800 635,600
Banco de Credito e Inversiones.......... 158,129 844,368
--------------
1,479,968
--------------
CONSUMER DURABLES-0.22%
Empresas Almacenes Paris................ 366,549 258,464
--------------
CONSUMER GOODS-0.04%
Compania Tecno Industrial S.A........... 3,000,000 51,282
--------------
ELECTRIC DISTRIBUTION-0.43%
Empresas Emel S.A....................... 31,153 502,575
--------------
ELECTRIC GENERATION-1.37%
Empresa Nacional de Electricidad S.A.... 1,549,162 721,618
Enersis S.A............................. 1,788,422 865,550
--------------
1,587,168
--------------
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------------------------
<S> <C> <C>
ENGINEERING & CONSTRUCTION-0.12%
Besalco S.A............................. 64,421 $ 134,761
--------------
FERTILIZER-0.41%
Sociedad Quimica y Minera de Chile S.A.,
Class A................................ 178,159 475,852
--------------
FINANCIAL SERVICES-0.01%
Invercap S.A............................ 12,094 9,432
--------------
FOOD & BEVERAGES-2.86%
Compania Cervecerias Unidas S.A......... 88,567 369,029
Distribucion y Servicio D&S S.A. ADR.... 120,500 1,807,500
Embotelladora Andina S.A., PNA.......... 174,674 496,403
Embotelladora Andina S.A., PNB.......... 10,923 28,008
Embotelladora Andina S.A., Series B
ADR.................................... 39,000 609,375
--------------
3,310,315
--------------
FORESTRY-0.95%
Compania de Petroleos de Chile S.A...... 287,615 709,819
Compania Manufacturera de Papeles y
Cartones S.A........................... 56,159 383,993
--------------
1,093,812
--------------
INSURANCE-0.16%
Compania de Seguros La Prevision Vida
S.A.+.................................. 217,878 189,475
--------------
RETAIL-0.23%
Sociedad Anonima Comercial e Industrial
Falabella.............................. 350,994 260,996
--------------
STEEL-0.24%
Compania de Aceros del Pacifico S.A..... 155,931 276,544
--------------
</TABLE>

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

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS-2.05%
Compania de Telecomunicaciones de Chile
S.A. ADR............................... 116,820 $ 2,372,906
--------------
TOTAL CHILE (Cost $11,538,206)......................... 12,003,550
--------------
COLOMBIA-1.10%
BANKING-0.61%
Banco de Bogota......................... 149 485
BanColombia S.A. ADR.................... 64,100 701,094
--------------
701,579
--------------
CEMENT-0.00%
Cementos Paz del Rio S.A. ADR+,++....... 31 305
--------------
FOOD & BEVERAGES-0.49%
Bavaria S.A............................. 96,308 562,793
--------------
TOTAL COLOMBIA (Cost $1,308,284)....................... 1,264,677
--------------
JAMAICA-1.29%
INVESTMENT & HOLDING COMPANIES-1.29%
Jamaican Assets I L.P.* (Cost
$1,307,345)............................ 1,300,000 1,496,365
--------------
LATIN AMERICA-0.00%
TELECOMMUNICATIONS-0.00%
International Wireless Communications,
Inc., Series D*+....................... 186,400 0
International Wireless Communications,
Inc., Series F*+....................... 10,840 0
International Wireless Communications,
Inc.,
Warrants (expiring 12/18/98)*+......... 640 0
International Wireless Communications,
Inc., Warrants (expiring 08/17/07)*+... 1 0
--------------
TOTAL LATIN AMERICA (Cost $1,328,825).................. 0
--------------
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------------------------
<S> <C> <C>
MEXICO-27.96%
BROADCAST, RADIO & TELEVISION-2.62%
Grupo Televisa S.A. GDR+,++............. 80,370 $ 3,023,921
--------------
CEMENT-2.98%
Cemex, S.A. de C.V., Class B............ 55,920 246,459
Cemex, S.A. de C.V. CPO................. 851,305 3,192,986
--------------
3,439,445
--------------
CONGLOMERATES-0.81%
Desc, S.A. de C.V. ADR.................. 47,100 936,113
--------------
ENGINEERING & CONSTRUCTION-0.09%
Empresas ICA Sociedad Controladora, S.A.
de C.V. ADR+........................... 11,070 104,473
--------------
FINANCIAL SERVICES-0.59%
Grupo Financiero Bancomer S.A. ADR++.... 92,900 684,385
--------------
FOOD & BEVERAGES-4.99%
Fomento Economico Mexicano, S.A. de C.V.
ADR+................................... 94,560 2,978,640
Panamerican Beverages, Inc., Class A.... 88,634 2,786,431
--------------
5,765,071
--------------
INVESTMENT & HOLDING COMPANIES-2.55%
Corporacion Industrial SanLuis, S.A. de
C.V. CPO............................... 527,958 2,056,598
Grupo Carso, S.A. de C.V., Class A1..... 216,800 895,190
--------------
2,951,788
--------------
PAPER PRODUCTS-3.45%
Kimberly-Clark de Mexico, S.A. de C.V.,
Class A................................ 1,128,130 3,986,436
--------------
RETAIL-5.12%
Cifra S.A. de C.V. ADR+................. 307,636 4,306,904
Controladora Comercial Mexicana, S.A. de
C.V. GDR............................... 57,400 972,213
</TABLE>

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

FIXED OR FLOATING RATE INVESTMENTS-0.23%
ARGENTINA-0.00%
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Republic of Argentina, Bocon Pre 2, FRN,
5.70%, 04/01/01(c) (Cost $398)......... USD 0 392
--------------
LATIN AMERICA-0.23%
International Wireless
Communications, Inc.
Senior Secured Notes, 14.00%-25.00%,
08/17/02*(b) (Cost $319,356)........... 323 266,820
--------------
TOTAL FIXED OR FLOATING RATE INVESTMENTS (Cost
$319,754)............................................. 267,212
--------------
SHORT-TERM INVESTMENTS-0.40%
CHILEAN MUTUAL FUNDS-0.40%
<CAPTION>
No. of
Shares
-------------
<S> <C> <C>
Bice Manager Investment
Fund................................... 129,039 326,396
Bice Valores Investment Fund............ 2,247 19,422
Fondo Mutuo Santander Money Market...... 20,900 91,072
Fondo Mutuo Security Premium............ 4,043 23,558
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost $469,508)...........
460,448
--------------
</TABLE>

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

SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description (Note A)
- -----------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS-93.76%
(Cost $124,388,542) (Notes A,D)....................... $ 108,383,927
--------------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES-6.24%...
7,207,805
--------------
NET ASSETS-100.00%..................................... $ 115,591,732
--------------
--------------
</TABLE>

<TABLE>
<S> <C>
- ---------------------------------------------------------
* Not readily marketable security.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers."
=/= Restricted security (See Note F).
# As of June 30, 1998, the Fund committed to investing
an additional $853,253 of capital in Emerging Markets
Ventures, L.P.
(a) With an additional 6,945 rights attached, expiring
07/17/98, with no market value.
(b) As of March 31, 1998, this investment ceased accruing
interest.
(c) Adjustable rate; rate resets based on 1-month U.S.
Dollar London Interbank Offered Rate (LIBOR) flat.
Pro-rata sinking fund has been established.
ADR American Depositary Receipts.
CPO Ordinary Participation Certificates.
FRN Floating Rate Note.
GDR Global Depositary Receipts.
ON Ordinary Shares.
PN Preferred Shares.
PNA Preferred Shares, Class A.
PNB Preferred Shares, Class B.
PNC Preferred Shares, Class C.
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, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost
$124,388,542) (Note A)................. $108,383,927
Cash (including $217,835 of foreign
currencies with a cost of $217,923)
(Note A)............................... 5,836,759
Receivables:
Investments sold...................... 1,609,081
Dividends and interest................ 528,709
Prepaid expenses........................ 19,314
------------
Total Assets............................ 116,377,790
------------

LIABILITIES
Payables:
Investment advisory fee (Note B)...... 335,302
Investments purchased................. 242,437
Administration fees (Note B).......... 51,012
Other accrued expenses................ 157,307
------------
Total Liabilities....................... 786,058
------------
NET ASSETS (applicable to 8,623,728
shares of common stock outstanding)
(Note C)............................... $115,591,732
------------
------------

NET ASSET VALUE PER SHARE ($115,591,732
DIVIDED BY 8,623,728)................. $13.40
------------
------------

NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
8,623,728 shares issued and outstanding
(100,000,000 shares authorized)........ $ 8,624
Paid-in capital......................... 132,848,811
Undistributed net investment income..... 1,761,633
Accumulated net realized loss on
investments and foreign currency
related transactions................... (3,018,041)
Net unrealized depreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... (16,009,295)
------------
Net assets applicable to shares
outstanding............................ $115,591,732
------------
------------
</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, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 2,543,182
Interest.............................. 176,915
Less: Foreign taxes withheld.......... (203,831)
------------
Total Investment Income............... 2,516,266
------------
Expenses:
Investment advisory fees (Note B)..... 827,845
Custodian fees........................ 119,634
Administration fees (Note B).......... 109,851
Audit and legal fees.................. 44,757
Printing.............................. 43,655
Accounting fees....................... 33,977
Directors' fees....................... 18,100
Transfer agent fees................... 15,023
Insurance............................. 9,260
NYSE listing fees..................... 8,018
Other................................. 10,198
Brazilian taxes (Note A).............. 105,391
Chilean repatriation taxes (Note A)... 387,370
------------
Total Expenses........................ 1,733,079
Less: Fee waivers (Note B)............ (107,662)
------------
Net Expenses........................ 1,625,417
------------
Net Investment Income................. 890,849
------------

NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments........................... 119,699
Foreign currency related
transactions......................... (234,579)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... (33,611,756)
------------
Net realized and unrealized loss on
investments and foreign currency
related transactions................... (33,726,636)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $(32,835,787)
------------
------------
</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 Ended
June 30, 1998 December 31,
(unaudited) 1997
<S> <C> <C>
----------------------------------

INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 890,849 $ 1,282,911
Net realized gain/(loss) on
investments and foreign currency
related transactions................. (114,880) 20,710,091
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... (33,611,756) (4,851,235)
-------------- --------------
Net increase/(decrease) in net
assets resulting from operations... (32,835,787) 17,141,767
-------------- --------------
Dividends and distributions to
shareholders:
Net investment income................. -- (1,375,740)
Net realized gain on investments...... -- (12,900,547)
-------------- --------------
Total dividends and distributions to
shareholders....................... -- (14,276,287)
-------------- --------------
Capital share transactions (Note C):
Proceeds from 23,364 shares and 1,987
shares, respectively, issued in
reinvestment of dividends and
distributions........................ 297,889 34,027
-------------- --------------
Total increase/(decrease) in net
assets............................. (32,537,898) 2,899,507
-------------- --------------

NET ASSETS
Beginning of period..................... 148,129,630 145,230,123
-------------- --------------
End of period (including undistributed
net investment income of $1,761,633 and
$870,784, respectively)................ $ 115,591,732 $ 148,129,630
-------------- --------------
-------------- --------------
</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 For the
Six Period
Months October
Ended 30, 1991*
June 30, For the Years Ended December 31, through
1998 -------------------------------------------------------------------------- December
(unaudited) 1997 1996 1995 1994+ 1993+ 1992 31, 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period..... $17.22 $16.89 $14.93 $17.92 $22.50 $14.37 $15.44 $13.85**
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net investment income.... 0.10 0.15 0.19 0.06 0.01 0.11 0.21 0.06
Net realized and
unrealized gain/(loss)
on investments and
foreign currency related
transactions............ (3.92)++ 1.84 1.83 (2.81) 0.96 8.75 0.43 1.60
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net increase/(decrease)
in net assets resulting
from operations......... (3.82) 1.99 2.02 (2.75) 0.97 8.86 0.64 1.66
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Dividends and
distributions to
shareholders:
Net investment
income................ -- (0.16) (0.06) -- (0.17) -- (0.21) (0.06)
Net realized gain on
investments and
foreign currency
related
transactions.......... -- (1.50) -- (0.24) (3.10) (0.75) (1.32) (0.01)
In excess of net
realized gain......... -- -- -- -- -- -- (0.18) --
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Total dividends and
distributions to
shareholders............ -- (1.66) (0.06) (0.24) (3.27) (0.75) (1.71) (0.07)
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Effect of reduction of
accrued offering costs.. -- -- -- -- -- 0.02 -- --
Dilution due to capital
share rights offering... -- -- -- -- (2.28) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Net asset value, end of
period.................. $13.40 $17.22 $16.89 $14.93 $17.92 $22.50 $14.37 $15.44
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Market value, end of
period.................. $10.375 $13.688 $14.000 $12.875 $17.625 $25.625 $14.000 $13.500
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Total investment
return(a)............... (24.20)% 10.29% 9.18% (25.65)% (17.78)% 89.35% 16.49% (2.73)%
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- ---------- --------- ---------

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted)........... $115,592 $148,130 $145,230 $128,377 $153,128 $135,573 $86,359 $92,751
Ratio of expenses to
average net assets(c)... 2.40%(b) 1.89% 1.69% 2.04% 1.94% 2.00% 2.20% 2.35%(b)
Ratio of expenses to
average net assets,
excluding fee waivers... 2.56%(b) 2.02% 1.80% 2.15% -- -- -- --
Ratio of expenses to
average net assets,
excluding taxes......... 1.67%(b) 1.65% -- 1.81% 1.70% -- -- --
Ratio of net investment
income to average net
assets.................. 1.32%(b) 0.77% 1.16% 0.42% 0.04% 0.63% 1.27% 2.46%(b)
Portfolio turnover
rate.................... 57.87% 111.83% 43.22% 27.05% 68.46% 49.48% 68.70% 11.58%
</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.
++ Includes a $0.01 per share decrease to the Fund's net asset value per
share resulting from the dilutive impact of shares issued pursuant to
the Fund's automatic Dividend Reinvestment Plan.
(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.
(b) Annualized.
(c) Ratios reflect actual expenses incurred by the Fund. Amounts are net
of fee waivers and inclusive of taxes.

- --------------------------------------------------------------------------------
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:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities for which market quotations are
readily available are valued at the last sales price prior to the time of
determination, or, if no sales price is available at that time, at the closing
price 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 the
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 Board of Directors has established general guidelines for
calculating fair value of non-publicly traded securities. At June 30, 1998, the
Fund held 6.55% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $7,987,177 and fair value of
$7,574,090. The net asset value per share of the Fund is calculated on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.

CASH: Deposits held at Brown Brothers Harriman & Co., the Fund's custodian, in a
variable rate account are classified as cash. At June 30, 1998, the interest
rate was 5.25% 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
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 taxes 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.

For U.S. federal income tax purposes, realized foreign currency losses and net
realized capital losses from investments incurred after October 31, 1997, within
the prior fiscal year, are deemed to arise on the first day of the current
fiscal year. The Fund incurred and elected to defer such losses from the prior
fiscal year of $759,614.

Income received by the Fund from sources within Latin America may be subject to
withholding and other taxes imposed by such 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, 1998, the Fund incurred $387,370 of such expense.

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

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

Effective January 23, 1997, Brazil imposes a 0.20% CONTRIBUCAO SOBRE
MOVIMENTACAO FINANCIERA ("CPMF") tax that applies to most debit transactions
carried out by financial institutions. For the six months ended June 30, 1998,
the Fund incurred $105,391 of such expense.

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:

(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.

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 in value of investments and translation of
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 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.

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

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

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 imposed by a foreign country.

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.

The Fund may enter into repurchase agreements on U.S. Government securities with
primary government securities dealers recognized by the Federal Reserve Bank of
New York and member banks of the Federal Reserve System and on securities issued
by the governments of foreign countries, their instrumentalities and with
creditworthy parties in accordance with established procedures. Repurchase
agreements are contracts under which the buyer of a security simultaneously buys
and commits to resell the security to the seller at an agreed upon price and
date. Repurchase agreements are deposited with Fund's custodian and pursuant to
the terms of the repurchase agreement, the collateral must have an aggregate
market value greater than or equal to the repurchase price plus accrued interest
at all times. If the underlying securities fall below the value of the
repurchase price plus accrued interest, the Fund will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Fund maintains the right to sell the underlying securities at
market value and may claim any resulting loss against the seller; collectibility
of such claims may be limited. As of June 30, 1998, the Fund had no such
agreements.

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

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

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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 the Fund's former
sub-advisers. For the six months ended June 30, 1998, BEA earned $827,845 for
advisory services, of which BEA waived $107,662. 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, 1998, BEA was
reimbursed $5,973 for administrative services rendered to the Fund.

Celfin Servicios Financieros 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, 1998, Celfin earned
$26,017 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 0.08% of amounts in excess of $100 million.
For the six months ended June 30, 1998, BSFM earned $64,058 for administrative
services.

BEA Administration, Administradora de Fondos de Inversion de Capital Extranjero
S.A. ("AFICE"), an affiliate of BEA, 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 $61,400 at June 30, 1998) 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 $6,300 at June 30, 1998). For the six months ended June 30, 1998,
Celfin earned $39,820 and $3,620 for administration 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 8,623,728 shares outstanding at June 30, 1998, 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,
1998 was $127,170,881. Accordingly, the net unrealized depreciation of
investments (including investments denominated in foreign currencies) of
$18,786,954 was composed of gross appreciation of $6,040,762 for those
investments having an excess of value over cost and gross depreciation of
$24,827,716 for those investments having an excess of cost over value.

For the six months ended June 30, 1998, purchases and sales of securities, other
than short-term investments, were $74,548,570 and $77,259,937, respectively.
NOTE E. CREDIT AGREEMENT

The Fund, along with 18 other U.S. regulated management investment companies for
which BEA serves as investment adviser, has a credit agreement with BankBoston,
N.A. 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 19 funds exceed $50,000,000. The line of credit will bear

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

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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%.
During the six months ended June 30, 1998, the Fund had no amounts outstanding
under the credit agreement.

NOTE F. RESTRICTED SECURITY

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, 1998, share value of such security and percent of net
assets which the security comprises.

<TABLE>
<CAPTION>
NUMBER FAIR VALUE AT VALUE PERCENT OF
SECURITY OF SHARES ACQUISITION DATES COST JUNE 30, 1998 PER SHARE NET ASSETS
- ------------------------------------- ----------- ---------------------- ---------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Venworld Telecommunications 40,161 07/30/92 & 08/07/92 $ 817,105 $ 401,140 $ 9.99 0.35
</TABLE>

The Fund may incur certain costs in connection with the disposition of the above
security.
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)

On April 24, 1998, 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 two directors to the Board of Directors of the Fund.

<TABLE>
<CAPTION>
NAME OF DIRECTOR FOR WITHHELD NON-VOTES
- ----------------------------------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Dr. Enrique R. Arzac 4,945,610 381,429 3,296,689
James J. Cattano 4,944,728 382,311 3,296,689
</TABLE>

In addition to the directors re-elected at the meeting, Peter A. Gordon, George
W. Landau and Martin M. Torino continue to serve as directors of the Fund.

(2) To ratify the selection of PricewaterhouseCoopers LLP (formerly Coopers &
Lybrand L.L.P.) as independent public accountants for the year ending
December 31, 1998.

<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
3,956,182 316,678 1,054,179 3,296,689
</TABLE>

- --------------------------------------------------------------------------------
22
<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

- --------------------------------------------------------------------------------
23
<PAGE>
DESCRIPTION OF DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED)
the notice is received by the Agent not less than 48 hours before the payment is
to be 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 or 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
or 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 BankBoston, N.A.,
Investor Relations Department, P.O. Box 644, Mail Stop 45-02-09, Boston,
Massachusetts 02102-0644 or by telephone at 1-800-730-6001.

- --------------------------------------------------------------------------------
24
<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, 1998, BEA managed approximately $35.6 billion in assets.

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".

THE BEA GROUP OF FUNDS

LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds or a prospectus on any of the open-end mutual funds listed
below. The prospectus contains more complete information, including fees,
charges and expenses, and should be read carefully before investing or sending
money.

<TABLE>
<S> <C>
CLOSED-END FUNDS BEA ADVISOR FUNDS
SINGLE COUNTRY OPEN-END MUTUAL FUNDS
The Brazilian Equity Fund, Inc. (BZL) BEA Emerging Markets Equity Fund
The Chile Fund, Inc. (CH) BEA Global Telecommunications
Fund
The First Israel Fund, Inc. (ISL) BEA High Yield Fund
The Indonesia Fund, Inc. (IF) BEA International Equity Fund
The Portugal Fund, Inc. (PGF)

MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc.
(ETF)
The Latin America Investment Fund, Inc. (LAM)

FIXED INCOME For shareholder information or a
BEA Income Fund, Inc. (FBF) copy of a prospectus for any of
BEA Strategic Global Income Fund, Inc. (FBI) the open-end mutual funds, please
call, 1-800-401-2230.
For closed-end fund information Visit our website on the
please call, 1-800-293-1232. Internet:
http://www.beafunds.com
</TABLE>

- --------------------------------------------------------------------------------
<PAGE>
DIRECTORS AND CORPORATE OFFICERS

Dr. Enrique R. Arzac Director

James J. Cattano Director

Peter A. Gordon Director
George W. Landau Director
Martin M. Torino Director

William W. Priest, Jr. Chairman of the Board of Directors

Richard W. Watt Chief Investment Officer, President
and Director
Emily Alejos Investment Officer

Michael A. Pignataro Chief Financial Officer and
Secretary

Hal Liebes Senior Vice President

Rocco A. Del Guercio Vice President

Wendy S. Setnicka 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

BankBoston, N.A.
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103

LEGAL COUNSEL

Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099

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. [LOGO]

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3915-SAR-98