LATIN AMERICA EQUITY FUND INC, N-30D, 1999-03-03

LATIN AMERICA EQUITY FUND INC
N-30D, 1999-03-03

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<PAGE>

The Latin America
Equity Fund, Inc.
------------------------------
ANNUAL REPORT
DECEMBER 31, 1998

[GRAPHIC]

<PAGE>
CONTENTS

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

Portfolio Summary............................................................................ 6

Schedule of Investments...................................................................... 8

Statement of Assets and Liabilities.......................................................... 12

Statement of Operations...................................................................... 13

Statement of Changes in Net Assets........................................................... 14

Financial Highlights......................................................................... 15

Notes to Financial Statements................................................................ 16

Report of Independent Accountants............................................................ 21

Results of Annual Meeting of Shareholders.................................................... 22

Tax Information.............................................................................. 22

Description of InvestLink-SM- Program........................................................ 23
</TABLE>

PICTURED ON THE COVER IS A SCENIC VIEW OF CARACAS, VENEZUELA.

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

February 15, 1999

DEAR SHAREHOLDER:

I am writing to report on the activities of The Latin America Equity Fund, Inc.
(the "Fund") for the year ended December 31, 1998.

At December 31, 1998, the Fund's net assets were $86.7 million. The Fund's net
asset value ("NAV") was $10.06 per share (net of dividends paid of $0.11 per
share), as compared to $17.22 at December 31, 1997.

PERFORMANCE: HURT BY STOCK SELECTION IN BRAZIL AND MEXICO

For the year ended December 31, 1998, the Fund's total return, based on NAV and
assuming reinvestment of dividends, was -40.6%, versus -35.1% for the Morgan
Stanley Capital International Emerging Markets Free Latin America Index
("EMFLA").

The Fund underperformed its EMFLA benchmark in 1998 principally due to poor
stock selection in Brazil and Mexico. In Brazil, I emphasized the
telecommunications and electricity sectors because of their strong growth
prospects. Unfortunately for the Fund, telecom and electricity also are two of
the most liquid sectors in the Brazilian market, meaning that they suffered
disproportionately during the emerging markets sell-offs in the year's second
and third quarters.

Returns in Mexico were hurt by a sizable position in telecom--Telefonos de
Mexico, S.A. de C.V. ("Telmex") was the Fund's single largest holding at
December 31, 1998--as well as my preference for quality growth companies. Among
the latter, the beverage producer Fomento Economico Mexicano, S.A. de C.V.
("Femsa") and the retailer Cifra S.A. de C.V. ("Cifra") were hit especially
hard, as growth stocks generally were de-rated during the year.

The most positive contributor to performance was stock selection in Argentina.
Most of the Fund's Argentine exposure was to oil and gas companies, which fared
well relative to the Argentine market as a whole. Two of the nation's major oil
and gas companies (YPF Sociedad Anonima ("YPF") and Camuzzi Argentina S.A. )
were the Fund's third- and sixth-largest holdings, respectively, at year-end.

1998: A TOUGH YEAR FOR LATIN AMERICAN EQUITIES

By far, Latin America was the worst-performing region among the emerging world's
equity markets in 1998. EMFLA's 35.1% loss, for example, was considerably lower
than the 26.0% decline in the Morgan Stanley Capital International ("MSCI") EMEA
(I.E., Europe/Middle East/Africa) Index and the 11.0% fall in the MSCI Emerging
Markets Free Asia Index.

No Latin market escaped investors' ire. The best performer was Argentina, which
lost 24.3%; the worst, Venezuela, plunged 49.2%.

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1
<PAGE>
LETTER TO SHAREHOLDERS

A combination of adverse global and regional factors weighed most heavily on
market sentiment:

WEAK COMMODITY PRICES. Prices of most of the world's major commodities were
extraordinarily weak in 1998, in some cases reaching lows not seen in several
decades. This was a highly negative development for those Latin American
economies that are heavily dependent on revenues generated by the export of oil
(I.E., Mexico, Venezuela, Argentina, Colombia) and copper (I.E., Chile).

RUSSIAN FREE-FALL. Political and macroeconomic conditions in Russia sharply
deteriorated throughout the year, culminating in the government's devaluation of
the ruble and default on some of its debt in August. Investors seized on
Russia's woes as the next stage of the "contagion" effect that struck Asia's
economies in 1997, and assumed the worst for most emerging markets accordingly.

BRAZILIAN FISCAL DEFICIT. An alarmingly high fiscal deficit directed investor
attention to Brazil as the next likely victim of contagion after Russia. Because
Brazil is the largest economy in Latin America, therefore, concern about its
vulnerability translated into heavy selling in Latin markets generally.

Brazil's apparent progress toward deficit reduction in the fourth quarter (it
received a vital assistance package from the International Monetary Fund, and
Congress approved a restrictive fiscal program and other key legislative
measures) helped to improve market sentiment. By mid-January, however, worsening
conditions forced the government to devalue the REAL currency, a painful step
that it had long avoided.

POLITICAL VOLATILITY. 1998 was a particularly volatile year for politics in
several Latin American nations. Events in Brazil were significantly colored by
developments surrounding President Cardoso's bid for re-election (which he won).
Mexico experienced an unprecedented exchange of political views, as the
historically dominant PRI party loosened its hold on the government.
Presidential elections also took center-stage in Venezuela and Colombia.

GLOBAL RISK AVERSION. During the summer, overall investor tolerance for risk
took a sharply pessimistic turn in response to the conditions I have described,
along with ongoing doubts about Asia's economic viability and concerns that U.S.
interest rates might rise. The pessimism reached a frenzied peak in August, when
continuous and indiscriminate selling devastated virtually all of the world's
equity markets, both developed and emerging.

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2
<PAGE>
LETTER TO SHAREHOLDERS

PORTFOLIO STRATEGY: PRUDENTLY DEFENSIVE, EMPHASIZING BLUE-CHIPS
TOP 10 HOLDINGS, BY ISSUER*

<TABLE>
<CAPTION>
% OF
HOLDING COUNTRY NET ASSETS
----------------------- ---------------- ----------
<C> <S> <C> <C>
1. Telmex Mexico 10.0
2. Telebras Brazil 7.1
3. YPF Argentina 5.4
4. CVRD Brazil 4.0
5. Cemex Mexico 3.8
6. Camuzzi Argentina Argentina 3.6
7. Telesp Brazil 3.6
8. Cifra Mexico 3.4
9. Kimberly-Clark de Mexico 3.1
Mexico
10. Telefonica del Peru Peru 2.4
</TABLE>

<TABLE>
<S> <C>
*Company names are abbreviations of those found in the *Other includes Colombia, Global, Jamaica, Latin America
chart on page 7. and Venezuela.
</TABLE>

COUNTRY BREAKDOWN
(% of net assets)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
Argentina 12.72%
Brazil 31.67%
Chile 8.28%
Mexico 34.75%
Peru 4.94%
Cash and Other Assets 3.58%
Other* 4.06%
</TABLE>

Given the difficult environment for Latin American equities in 1998 and thus far
in 1999 as well, I believe it is most prudent to manage the Fund with a
defensive bias.
I am thus maintaining my preference for high-quality, blue-chip companies that
are best-positioned to weather any coming storm and subsequently thrive. In
their haste to run for the exits during last year's sell-offs, investors sold
these stocks down to valuation levels that ignore their inherent strengths and
assume no improvement in their business outlook. When regional sentiment
improves, as it ultimately must, such stocks should be among the first to
benefit.
More specifically, I favor the shares of companies with strong domestic
franchises and relatively low financial risk, along with selected exporters. As
the table above indicates, the portfolio's biggest individual holdings--Telmex,
Telebras, YPF, CVRD, Cemex, Camuzzi Argentina, Telesp, Cifra, Kimberly-Clark de
Mexico and Telefonica del Peru-- all fit this profile.
OUTLOOK: A YEAR OF TRANSITION
As I see it, 1999 should be a year of transition for Latin American economies
(and, hence, equity markets). While I do not expect a rapid resurgence of
growth, I do believe that things are unlikely to get much worse. If this
forecast is accurate, then Latin equities could begin to enjoy a sustainable
revival as investor attention shifts to a potential upturn in 2000.

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3
<PAGE>
LETTER TO SHAREHOLDERS

The key will be what happens in Brazil. The Cardoso administration faces an
uphill battle fraught with risks in its efforts to tame the fiscal deficit, push
interest rates down and get the economy back on track. The fruits of such
efforts will not be apparent until the third or fourth quarters of this year, at
the earliest.

In the meantime, there are several encouraging signs:

- - Brazil's problems have generated relatively limited fallout elsewhere in Latin
America. This stands in marked contrast to Asia, whose economies are far more
interdependent. Recent performance among Latin markets suggests that investors
are able to look beyond Brazil and view other nations in a more
country-specific manner.

- - Latin America has already gone through the peso crisis of 1994-95, meaning
that the region's economies are sturdier and potentially more resilient than
at any time in years.

- - Valuations throughout Latin equity markets are at historically low levels,
both on an absolute and relative basis. Stock prices, then, already appear to
reflect considerable negative expectations.

I would like to close my remarks by noting an important development. This past
October, the Directors of the Fund proposed and approved a program to buy back a
substantial portion (I.E., up to 15%) of the Fund's outstanding shares. The
Directors strongly believed in the appropriateness of such a move, given that
the discount of the Fund's share price to its net asset value had widened to
compellingly attractive levels. I will be able to discuss the progress made in
this direction in my next semi-annual report.

Respectfully,

/s/ Richard W. Watt
Richard W. Watt
President and Chief Investment Officer *

FROM CREDIT SUISSE ASSET MANAGEMENT:

I. Effective January 12, 1999, the Fund's investment adviser, BEA Associates,
changed its name to Credit Suisse Asset Management ("CSAM"). In making the
announcement, the firm said that it expected the new name to enhance its
recognition as a global asset manager. CSAM is the investment division of
Credit Suisse Group, one of the world's largest financial organizations,
with $600 billion in assets under management.

II. Effective on or about April 1, 1999, shareholders whose shares are
registered in their own name will automatically participate in a dividend
reinvestment program known as the InvestLink-SM- Program (the "Program").
The Program can be of value to shareholders in maintaining their
proportional ownership interest in the Fund in an

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

easy and convenient way. A shareholder whose shares are held in the name of
a broker/dealer or nominee should contact the Fund's Transfer Agent for
details about participating in the Program. The Program also provides for
additional share purchases. The Program is described on pages 23 through 25
of this report.

III. Many services provided to the Fund and its shareholders by Credit Suisse
Asset Management ("CSAM") and the Fund's service providers rely on the
functioning of their respective computer systems. Many computer systems
cannot distinguish the year 2000 from the year 1900, with resulting
potential difficulty in performing various calculations (the "Year 2000
Issue"). The Year 2000 Issue could potentially have an adverse impact on
the handling of security trades, the payment of interest and dividends,
pricing, account services and other Fund operations.

CSAM recognizes the importance of the Year 2000 Issue and is taking
appropriate steps necessary in preparation for the year 2000. At this time,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund, nor can there be any assurance that the Year
2000 Issue will not have an adverse effect on the Fund's investments or on
global markets or economies, generally.

CSAM anticipates that its systems will be adapted in time for the year
2000. CSAM is seeking assurances that comparable steps are being taken by
the Fund's other major service providers. CSAM will be monitoring the Year
2000 Issue in an effort to ensure appropriate preparation.

- --------------------------------------------------------------------------------
* Richard W. Watt, who is a Managing Director of Credit Suisse Asset Management
("CSAM"), is primarily responsible for management of the Fund's assets. He
joined CSAM 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.

- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF DECEMBER 31, 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>
December 31, 1998 December 31, 1997
Argentina 12.72% 4.70%
Brazil 31.67% 31.69%
Chile 8.28% 11.60%
Colombia 0.91% 0.00%
Jamaica 0.96% 0.91%
Latin America 0.31% 1.47%
Mexico 34.75% 38.13%
Peru 4.94% 3.60%
Venezuela 1.43% 6.99%
Global 0.45% 0.00%
Cash & Cash Equivalents 3.58% 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>
December 31, 1998 December 31, 1997
Banking 5.67% 2.13%
Broadcast, Radio and Television 2.01% 3.23%
Cement 3.78% 2.18%
Conglomerates 1.04% 3.31%
Electric Distribution 1.91% 4.12%
Electric Generation 2.15% 3.00%
Financial Services 3.41% 0.00%
Food & Beverages 10.50% 9.93%
Investment & Holding Companies 5.78% 4.82%
Local and/or Long Distance Telephone
Service 7.08% 3.07%
Mining 5.46% 3.53%
Oil & Natural Gas 12.68% 6.08%
Paper Products 3.55% 3.07%
Retail 3.63% 6.64%
Telecommunications 18.90% 21.96%
Utilities 3.33% 9.66%
Fixed or Floating Rate Investments 1.77% 0.00%
Other 3.69% 10.57%
Cash & Cash Equivalents 3.66% 2.70%
</TABLE>

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

THE LATIN AMERICA EQUITY FUND, INC.

PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1998 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS, BY ISSUER

<TABLE>
<CAPTION>
Percent of Net
Holding Sector Country/Region Assets
<C> <S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
1. Telefonos de Mexico, S.A. de C.V. Telecommunications Mexico 10.0
- -----------------------------------------------------------------------------------------------------------------------
2. Telecomunicacoes Brasileiras S.A. Local and/or Long Distance
Telephone Service Brazil 7.1
- -----------------------------------------------------------------------------------------------------------------------
3. YPF Sociedad Anonima Oil & Natural Gas Argentina 5.4
- -----------------------------------------------------------------------------------------------------------------------
4. Companhia Vale do Rio Doce Mining Brazil 4.0
- -----------------------------------------------------------------------------------------------------------------------
5. Cemex, S.A. de C.V. Cement Mexico 3.8
- -----------------------------------------------------------------------------------------------------------------------
6. Camuzzi Argentina S.A. Oil & Natural Gas Argentina 3.6
- -----------------------------------------------------------------------------------------------------------------------
7. Telecomunicacoes de Sao Paulo S.A. Telecommunications Brazil 3.6
- -----------------------------------------------------------------------------------------------------------------------
8. Cifra S.A. de C.V. Retail Mexico 3.4
- -----------------------------------------------------------------------------------------------------------------------
9. Kimberly-Clark de Mexico, S.A. de
C.V. Paper Products Mexico 3.1
- -----------------------------------------------------------------------------------------------------------------------
10. Telefonica del Peru S.A. Telecommunications Peru 2.4
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

SCHEDULE OF INVESTMENTS - DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- --------------------------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-94.57%
ARGENTINA-12.72%
INVESTMENT & HOLDING COMPANIES-1.34%
CEI Citicorp Holdings S.A., Class B+.... 348,283 $ 1,157,382
-----------
OIL & NATURAL GAS-10.50%
Camuzzi Argentina S.A.*+................ 1,403,504 3,098,959
Perez Companc S.A., Class B............. 308,307 1,305,359
YPF Sociedad Anonima ADR................ 168,100 4,696,294
-----------
9,100,612
-----------
TELECOMMUNICATIONS-0.88%
Telefonica de Argentina
S.A. ADR............................... 27,400 765,488
-----------
TOTAL ARGENTINA (Cost $9,829,319)...................... 11,023,482
-----------
BRAZIL-31.67%
BANKING-4.53%
Banco Bradesco S.A. PN.................. 146,516,325 812,464
Banco Bradesco S.A., Rights (expiring
11/01/99)+............................. 6,072,975 3,518
Banco do Brasil S.A., Series A Warrants
(expiring 06/30/01)+................... 11,076,400 11,367
Banco do Brasil S.A., Series B Warrants
(expiring 06/30/06)+................... 16,614,600 17,051
Banco do Brasil S.A., Series C Warrants
(expiring 06/30/11)+................... 27,691,000 33,002
Banco do Estado de Sao Paulo S.A. PN.... 14,721,994 609,228
Banco Itau S.A. PN...................... 2,667,789 1,302,685
Uniao de Bancos Brasileiros S.A. GDR.... 78,900 1,139,119
-----------
3,928,434
-----------
ELECTRIC DISTRIBUTION-1.19%
Companhia Energetica de Minas Gerais
ADR.................................... 54,150 1,030,832
-----------
FOOD & BEVERAGES-3.49%
Ceval Alimentos S.A. ON+................ 160,771,340 232,857

<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES (CONTINUED)

Companhia Brasileira de Distribuicao
Grupo Pao de Acucar ADR................ 81,935 $ 1,269,993
Companhia Cervejaria
Brahma PN.............................. 2,214,700 967,814
Santista Alimentos S.A. ON+............. 586,194 490,011
Seara Alimentos S.A.+................... 160,771,340 38,464
Serrana S.A. ON......................... 27,210 12,386
Serrana S.A. PN......................... 32,445 12,084
-----------
3,023,609
-----------
LOCAL AND/OR LONG DISTANCE TELEPHONE SERVICE-7.08%
Telecomunicacoes Brasileiras S.A. PN
ADR.................................... 84,428 6,136,860
-----------
MINING-4.05%
Companhia Vale do Rio Doce ADR.......... 48,274 619,307
Companhia Vale do Rio Doce PNA.......... 225,080 2,887,432
-----------
3,506,739
-----------
OIL & NATURAL GAS-2.18%
Petroleo Brasileiro S.A. PN............. 16,694,062 1,892,892
-----------
PAPER PRODUCTS-0.45%
Aracruz Celulose S.A. ADR............... 48,800 390,400
-----------
TELECOMMUNICATIONS-5.31%
Companhia Riograndense de
Telecomunicacoes S.A., PNA............. 3,277,786 1,180,084
Telecomunicacoes de Minas Gerais S.A.
PNB.................................... 11,291,520 329,891
Telecomunicacoes de Sao Paulo S.A. ON... 12,650,000 1,088,848
Telecomunicacoes de Sao Paulo S.A. PN... 14,706,822 2,004,729
-----------
4,603,552
-----------
</TABLE>

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

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
TEXTILES-0.06%
Companhia Tecidos Norte de Minas S.A.... 371,223 $ 49,158
-----------
UTILITIES-3.33%
Centrais Eletricas Brasileiras S.A.
PNB.................................... 67,635,366 1,298,689
Companhia Paranaense de Energia ADR..... 50,000 356,250
Companhia Paranaense de Energia PNB..... 92,000,000 662,446
Light-Servicos de
Eletricidade S.A....................... 4,681,067 569,515
-----------
2,886,900
-----------
TOTAL BRAZIL (Cost $35,991,317)........................ 27,449,376
-----------
CHILE-8.20%
BANKING-0.79%
Banco de Credito e Inversiones.......... 138,129 686,194
-----------
CONSUMER DURABLES-0.21%
Empresas Almacenes Paris S.A............ 366,549 185,889
-----------
ELECTRIC GENERATION-2.15%
Empresa Nacional de Electricidad S.A.... 1,464,162 530,594
Enersis S.A............................. 1,388,422 698,978
Enersis S.A. ADR........................ 24,600 634,988
-----------
1,864,560
-----------
ENGINEERING & CONSTRUCTION-0.14%
Besalco S.A............................. 64,421 118,428
-----------
FERTILIZER-0.61%
Sociedad Quimica y Minera de Chile S.A.,
Class A................................ 178,159 527,042
-----------
FINANCIAL SERVICES-0.01%
Invercap S.A............................ 12,094 8,178
-----------
FOOD & BEVERAGES-2.52%
Compania Cervecerias
Unidas S.A............................. 88,567 340,606
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES (CONTINUED)

Distribucion y Servicio D&S
S.A. ADR............................... 78,075 $ 897,863
Embotelladora Andina S.A. PNA........... 174,674 417,077
Embotelladora Andina S.A. PNB........... 10,923 24,004
Embotelladora Andina S.A., Series B
ADR.................................... 39,000 507,000
-----------
2,186,550
-----------
FORESTRY-1.09%
Compania de Petroleos de
Chile S.A.............................. 277,815 598,777
Empresas CMPC........................... 56,159 348,287
-----------
947,064
-----------
INSURANCE-0.19%
Compania de Seguros La Prevision Vida
S.A.+.................................. 217,878 161,135
-----------
RETAIL-0.20%
Sociedad Anonima Comercial e Industrial
Falabella.............................. 350,994 169,100
-----------
STEEL-0.29%
Compania de Aceros del
Pacifico S.A........................... 155,931 247,117
-----------
TOTAL CHILE (Cost $6,870,383).......................... 7,101,257
-----------
COLOMBIA-0.91%
BANKING-0.35%
Banco de Bogota......................... 158 559
BanColombia S.A. ADR.................... 64,100 300,469
-----------
301,028
-----------
CEMENT-0.00%
Cementos Paz del Rio S.A. ADR+, ++...... 31 231
-----------
FOOD & BEVERAGES-0.56%
Bavaria S.A............................. 96,308 483,399
-----------
TOTAL COLOMBIA (Cost $1,308,284)....................... 784,658
-----------
</TABLE>

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

SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
JAMAICA-0.96%
INVESTMENT & HOLDING COMPANIES-0.96%
Jamaican Assets I L.P.=/= (Cost
$946,859).............................. 939,513 $ 836,430
-----------
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 08/17/07)*+... 1 0
-----------
TOTAL LATIN AMERICA (Cost $1,254,510).................. 0
-----------
MEXICO-33.29%
BROADCAST, RADIO & TELEVISION-2.01%
Grupo Televisa S.A. GDR+................ 70,470 1,739,728
-----------
CEMENT-3.78%
Cemex, S.A. de C.V., Class B............ 215,122 531,018
Cemex, S.A. de C.V. CPO................. 1,273,992 2,746,060
-----------
3,277,078
-----------
CONGLOMERATES-1.04%
Desc, S.A. de C.V. ADR.................. 47,100 903,731
-----------
FINANCIAL SERVICES-2.97%
Grupo Financiero Banamex Accival, S.A.
de C.V.+............................... 1,366,048 1,790,137
Grupo Financiero Bancomer S.A. ADR++.... 183,900 788,434
-----------
2,578,571
-----------
FOOD & BEVERAGES-3.93%
Fomento Economico Mexicano, S.A. de C.V.
ADR.................................... 74,670 1,988,089
<CAPTION>
No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
FOOD & BEVERAGES (CONTINUED)

Grupo Modelo S.A. de C.V., Series C..... 670,088 $ 1,417,299
-----------
3,405,388
-----------
INVESTMENT & HOLDING COMPANIES-3.03%
Sanluis Corporacion, S.A. de C.V. CPO... 511,971 739,140
Grupo Carso, S.A. de C.V.,
Class A1............................... 556,800 1,888,792
-----------
2,627,932
-----------
PAPER PRODUCTS-3.10%
Kimberly-Clark de Mexico, S.A. de C.V.,
Class A................................ 845,663 2,689,388
-----------
RETAIL-3.43%
Cifra S.A. de C.V. ADR.................. 245,182 2,974,989
-----------
TELECOMMUNICATIONS-10.00%
Telefonos de Mexico, S.A. de C.V. ADR... 177,963 8,664,574
-----------
TOTAL MEXICO (Cost $34,376,002)........................ 28,861,379
-----------
PERU-4.94%
ELECTRIC DISTRIBUTION-0.72%
Ontario-Quinta A.V.V.*.................. 786,686 625,531
-----------
FINANCIAL SERVICES-0.43%
Credicorp Limited....................... 41,712 375,408
-----------
MINING-1.41%
Compania de Minas Buenaventura S.A.
Class B................................ 50,000 300,919
Compania de Minas Buenaventura S.A.
Class B ADR............................ 70,700 919,100
-----------
1,220,019
-----------
TELECOMMUNICATIONS-2.38%
Telefonica del Peru S.A. ADR............ 162,260 2,058,674
-----------
TOTAL PERU (Cost $4,378,964)........................... 4,279,632
-----------
</TABLE>

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

FIXED OR FLOATING RATE INVESTMENTS-1.77%
ARGENTINA-0.00%
<CAPTION>
Par (000)
-------------
<S> <C> <C>
Republic of Argentina, Bocon Pre 2, FRN,
5.70%, 04/01/01(a) (Cost $332)......... USD 0 302
-----------
LATIN AMERICA-0.31%
International Wireless Communications,
Inc., Senior Secured Notes
14.00%-25.00%, 08/17/02*(b) (Cost
$403,238).............................. 323 266,820
-----------
MEXICO-1.46%
United Mexican States, Ser. W-B, 6.25%,
12/31/19(c) (Cost $1,213,062).......... 1,625 1,264,413
-----------
TOTAL FIXED OR FLOATING RATE INVESTMENTS (Cost
$1,616,632)........................................... 1,531,535
-----------
<CAPTION>

No. of Value
Description Shares (Note A)
- --------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT-0.08%
CHILEAN MUTUAL FUND-0.08%
Fondo Mutuo Security Check (Cost
$73,904)............................... 16,041 $ 74,262
-----------

TOTAL INVESTMENTS-96.42%
(Cost $99,543,080) (Notes A,D)........................ 83,572,185
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES-3.58%...
3,103,796
-----------
NET ASSETS-100.00%..................................... $86,675,981
-----------
-----------
- ---------------------------------------------------------
* Not readily marketable security.
+ Security is non-income producing.
++ SEC Rule 144A security. Such securities are traded
only among "qualified institutional buyers."
=/= Restricted security, not readily marketable (See Note
F).
# As of December 31, 1998, the Fund committed to
investing an additional $1,060,754 of capital in
Emerging Markets Ventures, L.P.
(a) Adjustable rate; rate resets based on 1-month U.S.
Dollar London Interbank Offered Rate (LIBOR) flat.
Pro-rata sinking fund has been established.
(b) As of March 31, 1998, this investment ceased accruing
interest.
(c) Secured Brady Bond.
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.
USD United States Dollars.
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost $99,543,080)
(Note A)............................... $83,572,185
Cash (including $1,243 of foreign
currencies with a cost of $1,243) (Note
A)..................................... 4,044,247
Receivables:
Dividends............................. 469,593
Interest.............................. 25,674
Prepaid expenses........................ 1,769
-----------
Total Assets............................ 88,113,468
-----------

LIABILITIES
Payables:
Dividend.............................. 947,499
Investment advisory fees (Note B)..... 199,990
Administration fees (Note B).......... 47,940
Chilean repatriation taxes (Note A)... 155,556
Other accrued expenses................ 86,502
-----------
Total Liabilities....................... 1,437,487
-----------
NET ASSETS (applicable to 8,613,628
shares of common stock outstanding)
(Note C)............................... $86,675,981
-----------
-----------

NET ASSET VALUE PER SHARE ($86,675,981
DIVIDED BY 8,613,628)................. $10.06
-----------
-----------

NET ASSETS CONSIST OF
Capital stock, $0.001 par value;
8,613,628 shares issued and outstanding
(100,000,000 shares authorized)........ $ 8,614
Paid-in capital......................... 132,771,312
Distributions in excess of net
investment income...................... (722,668)
Accumulated net realized loss on
investments and foreign currency
related transactions................... (29,405,430)
Net unrealized depreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currencies..................... (15,975,847)
-----------
Net assets applicable to shares
outstanding............................ $86,675,981
-----------
-----------
</TABLE>

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 4,010,247
Interest.............................. 411,580
Less: Foreign taxes withheld.......... (324,456)
------------
Total Investment Income............... 4,097,371
------------
Expenses:
Investment advisory fees (Note B)..... 1,434,269
Administration fees (Note B).......... 196,258
Custodian fees........................ 184,336
Audit and legal fees.................. 119,421
Printing.............................. 109,213
Accounting fees....................... 76,143
Directors' fees....................... 42,500
Transfer agent fees................... 25,295
Insurance............................. 18,673
NYSE listing fees..................... 16,170
Other................................. 15,979
Brazilian taxes (Note A).............. 199,402
Chilean repatriation taxes (Note A)... 542,926
------------
Total Expenses........................ 2,980,585
Less: Fee waivers (Note B)............ (182,108)
------------
Net Expenses........................ 2,798,477
------------
Net Investment Income................. 1,298,894
------------

NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized loss from:
Investments........................... (27,986,585)
Foreign currency related
transactions......................... (460,531)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currencies...... (33,578,308)
------------
Net realized and unrealized loss on
investments and foreign currency
related transactions................... (62,025,424)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $(60,726,530)
------------
------------
</TABLE>

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

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

<TABLE>
<CAPTION>
For the Years Ended December
31,
-----------------------------
1998 1997
<S> <C> <C>
-----------------------------

INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 1,298,894 $ 1,282,911
Net realized gain/(loss) on
investments and foreign currency
related transactions................. (28,447,116) 20,710,091
Net change in unrealized appreciation
in value of investments and
translation of other assets and
liabilities denominated in foreign
currencies........................... (33,578,308) (4,851,235)
------------ ------------
Net increase/(decrease) in net
assets resulting from operations... (60,726,530) 17,141,767
------------ ------------
Dividends and distributions to
shareholders:
Net investment income................. (947,499) (1,375,740)
Net realized gain on investments...... -- (12,900,547)
------------ ------------
Total dividends and distributions to
shareholders....................... (947,499) (14,276,287)
------------ ------------
Capital share transactions (Note C):
Proceeds from 23,364 shares and 1,987
shares, respectively, issued in
reinvestment of dividends............ 297,889 34,027
Cost of 10,100 shares repurchased
(Note G)............................. (77,509) --
------------ ------------
Net increase in net assets resulting
from capital share transactions..... 220,380 34,027
------------ ------------
Total increase/(decrease) in net
assets............................. (61,453,649) 2,899,507
------------ ------------

NET ASSETS
Beginning of year....................... 148,129,630 145,230,123
------------ ------------
End of year............................. $ 86,675,981 $148,129,630*
------------ ------------
------------ ------------
- ------------------------------
</TABLE>

* Includes undistributed net investment income of $870,784.

- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
14
<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
Period
October 30,
For the Years Ended December 31, 1991* through
-------------------------------------------------------------------------------- December 31,
1998 1997 1996 1995 1994+ 1993+ 1992 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......... 0.15 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......... (7.20)++ 1.84 1.83 (2.81) 0.96 8.75 0.43 1.60
-------- -------- -------- -------- -------- -------- -------- -------------
Net increase/(decrease) in net
assets
resulting from operations.... (7.05) 1.99 2.02 (2.75) 0.97 8.86 0.64 1.66
-------- -------- -------- -------- -------- -------- -------- -------------
Dividends and distributions
to shareholders:
Net investment income....... (0.11) (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.............. (0.11) (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....................... $10.06 $17.22 $16.89 $14.93 $17.92 $22.50 $14.37 $15.44
-------- -------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------- -------------
Market value, end of period... $7.188 $13.688 $14.000 $12.875 $17.625 $25.625 $14.000 $13.500
-------- -------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------- -------------
Total investment return(a).... (46.63)% 10.29% 9.18% (25.65)% (17.78)% 89.35% 16.49% (2.73)%
-------- -------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------- -------------

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)..................... $86,676 $148,130 $145,230 $128,377 $153,128 $135,573 $86,359 $92,751
Ratio of expenses to average
net assets(c)................ 2.41% 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...................... 2.60% 2.02% 1.80% 2.15% -- -- -- --
Ratio of expenses to average
net assets, excluding
taxes........................ 1.77% 1.65% -- 1.81% 1.70% -- -- --
Ratio of net investment income
to average net assets........ 1.12% 0.77% 1.16% 0.42% 0.04% 0.63% 1.27% 2.46%(b)
Portfolio turnover rate....... 142.35% 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 program.
(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 program. 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.
15
<PAGE>
- --------------------------------------------------------------------------------

THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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 December 31, 1998,
the Fund held 6.35% of its net assets in securities valued in good faith by the
Board of Directors with an aggregate cost of $6,739,207 and fair value of
$5,503,352. 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 December 31, 1998, the interest
rate was 4.125% 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, 1998, within
the fiscal year, are deemed to arise on the first day of the following fiscal
year. The Fund incurred and elected to defer such losses of $95,714 and
$691,438, respectively.

At December 31, 1998, the Fund had a capital loss carryover of $26,179,244 which
expires in 2006.

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

- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
original invested capital. For the year ended December 31, 1998, the Fund
incurred $542,926 of such expense.

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 year ended December 31, 1998, the
Fund incurred $199,402 of such expense. Effective, January 23, 1999, the CPMF
tax will expire and no longer be charged.

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 or losses 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.

At December 31, 1998, the Fund reclassified $364,816 of net realized losses from
foreign currency related transactions to undistributed net investment income. In
addition, the Fund reclassified $1,580,031 of

- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
THE LATIN AMERICA EQUITY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
distributions from accumulated net realized loss on investments and foreign
currency related transactions to undistributed net investment income.

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 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
substantially less than those originally paid by the Fund or the current
carrying values. 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

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
any resulting loss against the seller; collectibility of such claims may be
limited. As of December 31, 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 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 year ended December 31, 1998, BEA earned $1,434,269 for
advisory services, of which BEA waived $182,108. 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 year ended December 31, 1998, BEA was
reimbursed $9,045 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 year ended December 31, 1998, Celfin earned
$20,748 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 year ended December 31, 1998, BSFM earned $111,913 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 $61,600 at December 31, 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 December 31, 1998). For the year ended December 31,
1998, Celfin earned $75,300 and $4,800 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 8,613,628 shares outstanding at December 31, 1998, BEA
owned 7,169 shares.

NOTE D. INVESTMENT IN SECURITIES

For U.S. federal income tax purposes, the cost of securities owned at December
31, 1998 was $101,982,114. Accordingly, the net unrealized depreciation of
investments (including investments denominated in foreign currencies) of
$18,409,929 was composed of gross appreciation of $4,224,443 for those
investments having an excess of value over cost and gross depreciation of
$22,634,372 for those investments having an excess of cost over value.

For the year ended December 31, 1998, purchases and sales of securities, other
than short-term investments, were $156,514,749 and $155,500,482, respectively.

NOTE E. CREDIT AGREEMENT

The Fund, along with 10 other U.S. regulated management investment companies for
which BEA serves as investment adviser, has a credit agreement

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
with BankBoston, N.A. The agreement provides that each fund is permitted to
borrow an amount equal to the lesser of $25,000,000 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 11 funds exceed $25,000,000. 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 for the year ended
and at December 31, 1998.

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 December 31, 1998, per share value of such securities and
percent of net assets which the securities comprise.

<TABLE>
<CAPTION>
FAIR VALUE AT
NUMBER DECEMBER 31, VALUE PERCENT OF
SECURITY OF SHARES ACQUISITION DATES COST 1998 PER SHARE NET ASSETS
- ------------------------------------- ----------- ---------------------- ---------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Emerging Markets Ventures, L.P. 5,333 01/22/98 $ 5,333 $ 4,645 $ 0.87 0.01
Emerging Markets Ventures, L.P. 234,746 05/06/98 234,746 204,452 0.87 0.24
Emerging Markets Ventures, L.P. 115,870 07/07/98 115,870 100,916 0.87 0.12
Emerging Markets Ventures, L.P. 91,609 10/27/98 91,609 79,787 0.87 0.09
Jamaican Assets I L.P. 469,756 07/29/97 473,429 418,215 0.89 0.48
Jamaican Assets I L.P. 469,757 10/20/97 473,430 418,215 0.89 0.48
Venworld Telecommunications 24,498 07/30/92 502,406 174,344 7.12 0.20
Venworld Telecommunications 15,663 08/07/92 314,699 111,468 7.12 0.13
</TABLE>

The Fund may incur certain costs in connection with the disposition of the above
securities.

NOTE G. SHARE REPURCHASE PROGRAM

On October 21, 1998, the Fund announced that its Board of Directors has
authorized the repurchase by the Fund of up to 15% of the Fund's outstanding
common stock, for the purposes of enhancing shareholder value. The Fund's Board
has authorized management of the Fund to repurchase such shares in open market
transactions at prevailing market prices from time to time and in a manner
consistent with the Fund continuing to seek to achieve its investment
objectives. The Board's actions were taken in light of the significant discounts
at which the Fund's shares recently have been trading. It is intended both to
provide additional liquidity to those shareholders that elect to sell their
shares and to enhance the net asset value of the shares held by those
shareholders that maintain their investment. The repurchase program will be
subject to review by the Board of Directors of the Fund. From October 21, 1998
to December 31, 1998, the Fund repurchased 10,100 of its shares for a total of
$77,509 at a weighted average discount of 26.05% from net asset value. The
discount of individual repurchases ranged from 25.58%-26.19%.

- --------------------------------------------------------------------------------
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
of The Latin America Equity Fund, Inc.:

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations, and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Latin America Equity Fund, Inc.
(the "Fund") at December 31, 1998, and the results of its operations for the
year then ended, changes in net assets for each of the two years in the period
then ended, and its financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian, brokers and issuers, provide a reasonable
basis for the opinion expressed above.

PricewaterhouseCoopers LLP

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 19, 1999

- --------------------------------------------------------------------------------
21
<PAGE>
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, George W. Landau, Peter
A. Gordon, William W. Priest, Jr., Martin M. Torino and Richard W. Watt 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>

TAX INFORMATION (UNAUDITED)

The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of the Fund's year end
(December 31, 1998) as to the U.S. federal tax status of dividends and
distributions received by the Fund's shareholders in respect of such fiscal
year. The $0.11 per share dividend paid in respect of such year is represented
entirely by net investment income. There were no distributions which would
qualify for the dividend received deduction available to corporate shareholders.

The Fund does not intend to make an election under Section 853 to pass through
foreign taxes paid by the Fund to its shareholders. This information is given to
meet certain requirements of the Internal Revenue Code of 1986, as amended.
Shareholders should refer to their Form 1099-DIV to determine the amount
includable on their respective tax returns for 1998.

Notification for calendar year 1998 was mailed in January 1999. The notification
reflected the amount to be used by calendar year taxpayers on their U.S. federal
income tax returns along with Form 1099-DIV.

Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend and distributions. They will generally not be entitled
to a foreign tax credit or deduction for the foreign withholding taxes paid by
the Fund.

In general, dividends and distributions received by tax-exempt recipients (e.g.,
IRAs and Keoghs) need not be reported as taxable income for U.S. federal income
tax purposes. However, some retirement trusts (e.g., corporate, Keoghs and
403(b)(7) plans) may need this information for their annual information
reporting.

Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Fund.

- --------------------------------------------------------------------------------
22
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM

The InvestLink Program is sponsored and administered by BankBoston, N.A., not by
The Latin America Equity Fund, Inc. (the "Fund"). BankBoston, N.A. will act as
program administrator (the "Program Administrator") of the InvestLink Program
(the "Program"). The purpose of the Program is to provide interested investors
with a simple and convenient way to invest funds and reinvest dividends in
shares of the Fund's common stock ("Shares") at prevailing prices, with reduced
brokerage commissions and fees.

An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.

A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
include brokerage commissions.) Participants will not be charged any fee for
reinvesting dividends.

The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of Company Common Stock in the open market. Such purchases will be made
by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the the purchase date. In all cases, transaction processing will occur
within 30 days of the receipt of funds, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of the
Federal Securities laws or when unusual market conditions make prudent
investment impracticable. In the event the Program Administrator is unable to
purchase Shares within 30 days of the receipt of funds, such funds will be
returned to the participants.

The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.

BankBoston, N.A., as Program Administrator, administers the Program for
participants, keeps records, sends statements of account to participants and
performs other duties relating to the Program. Each participant in the Program
will receive a statement of his account following each purchase of Shares. The
statements will also show the amount of dividends credited to such participant's
account (if applicable), as well as the fees paid by the participant. In
addition, each participant

- --------------------------------------------------------------------------------
23
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
will receive copies of the Fund's annual and semi-annual reports to
shareholders, proxy statements and, if applicable, dividend income information
for tax reporting purposes.

If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.

Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.

A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.

Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.

All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.

A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.

The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or willful misconduct. Shares held in custody by the
Program Administrator are not subject to protection under the Securities
Investors Protection Act of 1970.

The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no

- --------------------------------------------------------------------------------
24
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
different than his investment in directly held Shares in this regard. The
participant bears the risk of loss and the benefits of gain from market price
changes with respect to all of his Shares. Neither the Fund nor the Program
Administrator can guarantee that Shares purchased under the Program will, at any
particular time, be worth more or less than their purchase price. Each
participant must make an independent investment decision based on his own
judgment and research.

While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.

Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including the terms and conditions) may be obtained by calling the
Program Administrator at one of the following telephone numbers: First Time
Investors--(800) 338-1176; Current Shareholders--(800) 730-6001. All
correspondence regarding the Program should be directed to: BankBoston, N.A.,
InvestLink Program, P.O. Box 8040, Boston, MA 02266-8040.

- ---------------------------------------------
*InvestLink-SM- is a service mark of Boston EquiServe Limited Partnership.

- --------------------------------------------------------------------------------
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 Credit Suisse Asset Management ("CSAM"), formerly known as BEA Associates.
CSAM 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. CSAM manages money for corporate pension
and profit-sharing funds, public pension funds, union funds, endowments and
other charitable institutions and private individuals. As of December 31, 1998,
CSAM managed approximately $35.3 billion in assets in the U.S.

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 CSAM CLOSED-END FUNDS

LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds listed below at 1-800-293-1232 or visit our website on the
Internet: http://www.cefsource.com.

CLOSED-END FUNDS
SINGLE COUNTRY
The Brazilian Equity Fund, Inc. (BZL)
The Chile Fund, Inc. (CH)
The First Israel Fund, Inc. (ISL)
The Indonesia Fund, Inc. (IF)
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
BEA Income Fund, Inc. (FBF)
BEA Strategic Global Income Fund, Inc. (FBI)

Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that The Latin America Equity Fund, Inc. may
from time to time purchase shares of its capital stock in the open market.

- --------------------------------------------------------------------------------
<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

Hal Liebes Senior Vice President

Michael A. Pignataro Chief Financial Officer and
Secretary

Rocco A. Del Guercio Vice President

INVESTMENT ADVISER

Credit Suisse Asset Management
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. 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]

- --------------------------------------------------------------------------------
3915-AR-98