When you hear the name "Colombia," two other words probably spring to mind: "violence" and "drugs." Indeed, for most investors, it's hard to imagine Colombia as anything but a "Scarface"- style narco state. Yet, this popular image of Colombia does not do the country justice for the progress that it's seen since the ascension of Álvaro Uribe, the country's tough and popular president, in 2002.

Even Uribe's critics concede that Colombia was on the verge of being a failed state. Yet, in the past eight years -- thanks in part to a good dollop of, no doubt, self-interested American aid -- Uribe has driven FARC, a group of leftist revolutionary guerillas, from heavily populated central Colombia to more remote, less threatening areas. Cocaine production has fallen by around half. Colombia's brightest citizens are no longer emigrating in droves. Travelers on the roads between its main cities no longer live in fear of being kidnapped or killed. And, in what has been heralded as evidence of the strength of Colombia's new-found adherence to the "Rule of Law," Colombia's courts forbade Uribe's recent effort to modify the Constitution to allow him to run for a third term. No Soviet-style personality cults allowed.

Understanding the current state of play in Colombia -- and how it is a terrific example of when countries get "less bad" that investors make the most money in global stock markets -- could be the key to your making some terrific profits in this Latin American "turnaround play" over the coming years.

Colombia: Getting the Basics Right

With a population of 44 million, and an economy the size of Indiana, Colombia never will have the economic heft of larger rivals like Brazil and Mexico. That does not make its economic achievements less impressive. After battling double-digit inflation and 20% unemployment in the early part of the last decade, Colombia introduced economic reforms that have shrunk its national debt and kick started its economic growth.

How Colombia weathered the "Great Recession" also offers an important lesson for other small developing countries. While many Western economies danced on the precipice of economic collapse, Colombia's economy suffered only a mild recession. The country's industrial production fell 5.9% in 2009 -- barely a blip when compared with countries like Spain, Germany and Japan, where production plummeted over 20% in 2009. A "stimulus package," which included a 14% year-over-year increase in construction spending and public works projects in 2009, caused the country's budget deficit to rise. But by the end of this year, Colombia's net debt will still equal only about 38% of GDP. That's less than half the level it was only four years ago, and where the United States and the United Kingdom will stand by the end of 2010. With the economy expected to expand 2.5% this year, the governor of Colombia's central bank is lobbying for an investment-grade rating for Colombia -- something Brazil achieved only in 2008. Ratings agency Standard & Poor's indicated it has been impressed by Colombia. But an upgrade isn't in the cards just quite yet.

That said, Colombia is hardly the free-market success story that is Chile. Unemployment stands at 11.8%, compared with a Latin American average of 8.3%. About 60% of Colombians work in the informal economy. Fewer than 10% of Colombians go to college. At least one quarter of the country -- and up to 40% -- live below the poverty line.

Colombia also has its political challenges, most notably its ongoing feud with its problematic neighbor Venezuela and its vociferous leader, Hugo Chávez. In repeated diplomatic rows related to Colombia's relentless pursuit of FARC guerillas, the presidents of Venezuela and Ecuador have posted troops along the Colombian border. And last July, with characteristic bravado, Chávez threatened Colombia with "one hundred years of war," announcing that trade and diplomatic relations between the two countries would be "frozen" after an agreement that allowed greater U.S. military presence in Colombia. Uribe and Chávez almost came to blows at a meeting of Latin American leaders in Mexico last year, when Mr. Uribe told Chávez to "be a man."

Colombia: Making Money from Latin America's Top Turnaround

Colombia is hardly paradise. But it is a much better place now than it was 20 or 30 years ago. Yet for all its achievements, Colombia is still a bit of a stock market pariah. Although Colombia is one of the largest economies in Latin America, neither the iShares S&P Latin America 40 Index Fund (ILF) or SPDR S&P Emerging Latin America ETF (GML) invests in Colombian stocks.

Colombia is also one of the few global markets that managed to maintain its momentum, with the benchmark IGBC Index hitting an all-time high in recent days. The Global X/InterBolsa FTSE Colombia 20 ETF (GXG) has more than doubled since its launch -- far outpacing the U.S. S&P 500, and outperforming even BRIC star Brazil.

Sign up now to receive The Global Guru e-Newsletter FREE! Email Address: Yes! Please send me Nicholas Vardy's FREE weekly newsletter, The Global Guru.