Latin America is getting the upper hand on inflation that once ravaged the region but central banks in some of Asia's heavyweight economies are having a tougher time.

The question of who will win the battle of balancing policy to achieve optimum growth and inflation levels remains an open one, simply because potential price pressures from rising wages and demand are more elevated in India and China than in some of their Latin American peers.

But for the moment, Brazil and Chile appear to have done a better job of pacing rate rises and currency appreciation than India and possibly China.

I would say that Latin America has topped India in its inflation fight, but not necessarily China, said Frederic Neumann, managing director and co-head of Asian economics research.

In Latin America, potential price pressures are perhaps not as prominent as in China at the moment, so from this perspective, yes, there is probably an argument to be made that Latam is charting a more prudent course, certainly relative to its own history.

In part, this may be because Latam has allowed slightly faster currency appreciation than China, which has probably taken some of the froth out of local inflation there, Neumann said.

In Brazil, annual inflation is above the top of the government's target range, but monthly price rises slowed in May to their weakest pace in eight months. Private economists recently cut their forecasts for price growth this year.

In Peru, the central bank said last week inflation should slow this month due to lower world food prices.

Inflation in Latin America looks like it isn't much of a problem, said emerging market economist Natig Mustafayev at Credit Suisse in London.

That means central banks in much of the region are probably getting closer to the end of their campaigns to raise interest rates.

Central bankers are under less pressure, Mustafayev said.

Compare that with India. The main inflation measure stands at 9 percent and even core inflation at 7.3 percent in May was close to the level of the central bank's 7.5 percent policy lending rate.

POLICY PATHS DIVERGE?

Developing economies have been important motors for the global economy after soaring debt levels left growth weak in the United States and Europe.

But the recovery fueled inflation, prompting central banks from India to Chile to raise interest rates despite concerns about attracting capital inflows and pumping up asset bubbles.

Now, it appears Latin American central bankers are starting to relax a bit as the global economy cools down and food prices stabilize to take the edge off of inflation.

Peru held rates steady last week, ending a six-month streak of hikes. Brazil and Chile have already slowed the pace at which they raise interest rates.

Investors believe Brazil may only conduct one more hike, to take rates from 12.25 percent to 12.50 percent. That would make them among the highest in the world but more than a percentage point lower than at the end of 2008, before the worst of the global financial crisis.

To be sure, inflation in some Latin American countries that have eschewed orthodox monetary polices remains high. In Argentina, the rate is estimated to be about 25 percent a year, although the government says it is less than half that.

Much of developing Asia paints a similar picture to Brazil and the other Latin American countries where inflation pressures are easing. China and India, however, are having a harder time.

Data this week showed inflation sped up in both countries, leading their central banks to respond by tightening credit conditions.

China's consumer price inflation hit a 34-month high in May of 5.5 percent. At the same time, non-food inflation is 2.9 percent, low for an economy expanding at a close to double-digit pace.

HSBC's Neumann reckoned India still had some way to go in policy tightening, but China's inflation problem was more manageable, even if wages and food prices were rising.

Higher inflation in China could have lasting effects on the global economy. In Mexico, for example, some companies are setting up factories because Chinese wages are rising much more quickly than they are for Mexican workers.

India's central bank raised interest rates on Thursday for the 10th time in just over a year. Inflation is likely to be exacerbated in coming months because the government is expected to raise the price of some fuels.

China has been more reluctant to raise interest rates and has relied more on restricting the amount of money that banks can lend.

Both however stand apart from their Latin American counterparts when it comes to currency appreciation.

The Indian rupee has fallen half a percent against the dollar so far in 2011, while the Chinese yuan's 2 percent rise pales against the Colombian peso's 6.7 percent jump or the Brazilian real's 3.5 percent gain.

LATAM AHEAD OF THE CURVE

Inflation headaches in Latin America are more mild.

In a comparative sense, policymakers in Latin America are ahead of the curve, said Neil Shearing, an economist as Capital Economics in London.

Getting inflation under control in Brazil would be a relief for President Dilma Rousseff who is pushing economic reforms. Fast-rising prices hurt her because they provide Brazilians with uncomfortable memories of hyperinflation in the early 1990s.

Lower inflation in Brazil could draw back investors that fled the country's stock market earlier this year because they doubted the central bank's resolve to tackle rising prices.

We are starting to see some interest again in Brazil, said Frederick Searby, head of Latin American stock strategy at Deutsche Bank in New York.

Not that Asia is losing its luster. China is still the world's emerging economic superpower and will continue to draw huge investment flows.

Joyce Chang, global head of emerging market research at JPMorgan, remains bullish on emerging markets in general.

Any indicator that you look at, whether it is the fiscal or the debt indicators, still favors emerging markets, Chang told the Reuters Investment Outlook Summit which took place last week in New York.

(Additional reporting by Michael O'Boyle in Mexico City; further reporting by Alexandra Alper and Herb Lash in New York; Editing by William Schomberg and Neil Fullick)

Inflation