I just returned from an amazing vacation in Costa Rica, during which I covered a large swathe of the northern part of the country and ventured into Nicaragua. If you’ve never been, I highly recommend it; the country offers beautiful landscapes, friendly and hospitable people, and amazing shopping.

The swing through Nicaragua was also extremely interesting if for no other reason than–if you’re able to actually find folks willing to talk about the political situation–conversations with the locals will make you extremely grateful to hail from the US, no matter how messy or flawed our political process may be.

The scuttlebutt is that political factions are gearing up for a hot conflict regardless of the outcome of November elections. That puts a different face on the July deployment to Costa Rica of a flotilla of 46 US Navy warships, which includes 7,000 combat-ready marines as well as helicopters and jets with vertical take-off and landing abilities. Ostensibly there for drug interdiction operations, this seems a heavy-handed force just to take down drug runners, even if they are heavily armed. Given the fact that Costa Rica has no standing army and is considered the Switzerland of Central America, the deployment sounds more like an insurance policy in case of destabilization in the region–the deployment is only scheduled to last through the end of 2010.

The trip also provided interesting material for a case study on the growth and priorities of a developing nation. A few years ago the Costa Rican government set a goal of becoming the first carbon-neutral country in the world by 2021, a program that led to the creation of jobs building wind and solar power installations as well as a new, massive geothermal power station. It was also fascinating to see the country’s devotion to education, with free and compulsory attendance through high school and free or heavily subsidized post-secondary education. What’s emerging is a well-educated, extremely competitive labor force that will drive innovation and development. In fact, my tour guide during one stretch of my vacation had recently completed a master’s degree in ecology.

This highly educated, relatively inexpensive labor force is precisely why Intel (NSDQ: INTC) opted to site a microprocessor production facility in Costa Rica, and it’s why several other major American companies are planning to establish administrative centers in the country. These facilities will, in turn, create more jobs, establishing a virtuous cycle that boosts standards of living and raises demand for consumer goods.

It’s amazing how many investment ideas you can uncover while on the road. If November passes without any serious problems in Latin America, I’ll be looking for ways to leverage Costa Rica and the region in my portfolio.

Needless to say, though, I haven’t been able to devote much research time to the issue, as I’m still catching up on e-mail and voice-mail messages left during my absence. I have, however, had chance to comb through last week’s new fund launches, and I’ve found several interesting prospects.

What’s New

With 11 exchange-traded funds (ETF) and exchange-traded notes (ETN) launched, last week was a busy one for new debutantes.

Barclays Plc (NYSE: BCS) led the pack with the Aug. 10 launch of eight new ETNs focused on US Treasury bonds:

• iPath US Treasury Long Bond Bear (NYSE: DLBS)
• iPath US Treasury Long Bond Bull (NYSE: DLBL)
• iPath US Treasury 10-Year Bear (NYSE: DTYS)
• iPath US Treasury 10-Year Bull (NYSE: DTYL)
• iPath US Treasury 2-Year Bear (NYSE: DTUS)
• iPath US Treasury 2-Year Bull (NYSE: DTUL)
• iPath US Treasury Flattener (NYSE: FLAT)
• iPath US Treasury Steepener (NYSE: STPP)

Most are straightforward and are similar to other products currently available, though they do fill out gaps in Barclays’ iPath offerings. But iPath US Treasury Flattener (NYSE: FLAT) and iPath US Treasury Steepener (NYSE: STPP) are rather unique concepts.

Both track the Barclays Capital US Treasury 2-Year/10-Year Yield Curve Index, which captures the returns available from a changing yield curve by tracking rolling investments in US Treasury note futures. Steepener should produce gains when the spread between two-year Treasuries and 10-year Treasuries widens, and Flattener will capture the opposite effect, producing gains when the spread narrows. I’m not aware of any other product on the market that allows investors to play the curve with rather specific maturities; these two ETNs could have a lot of utility as alternative holding or a hedge for a bar-belled bond portfolio. (See Investing in Bonds: Mitigating Interest Rate Risk.)

If Flattener were to get some volume behind it–the fund currently averages 8,000 shares traded on a daily basis, a figure skewed by a couple 20,000-share days when it was first issued–it would definitely look attractive given the current state of the yield curve and the fact that I believe we’ve seen a Treasury bubble develop.

There’s only major drawback to the new set of iPath ETNs. Both focus on Treasuries, but their expense ratios are high, carrying 0.75 percent annual price tags, while most other Treasury funds average around 0.3 percent or less. The expense seems to be justified by the unique character of these offerings it’s too rich for the other new items.

United States Commodity Index Fund (NUSE: USCI), which will track a benchmark equally weighted among 14 futures contracts selected on a monthly basis from a universe of 27, also began trading on Aug. 10. Those 27 contracts cover the gamut of energy, precious metals, industrial metals, grains, soft commodities and livestock. The fund’s index will be built using an innovation that should–hopefully–prove very useful to investors.

Contango is a major problem facing commodity investors; I’ve spilt a lot of digital ink on the issue because it’s a condition that eats away at the returns of commodity funds, even when the broader commodities market is doing well. The managers of United States Commodity Index Fund intend to address that problem by applying quantitative analysis to the universe of 27 possible markets to select 14 that are “backwardated.” That should minimize, if not eliminate, contango issues and sidestep the problems faced by other commodity funds. (See ETFs, Derivatives and the Future.)

Although the fund is extremely expensive, with a 0.95 percent annual expense ratio, it may be worth the cost if it accomplishes what it’s set out to do. Still, I’d give it some time to mature before considering an investment.

Finally, WisdomTree Emerging Markets Local Debt Fund (NYSE: ELD) launched on Aug. One of five ETFs that specialize in emerging-market debt, it’s only the second to buy debt denominated in local currencies rather than the US dollar. That’s an important distinction because it will provide currency exposure as well as fixed-income exposure. That isn’t necessarily a bad thing, though, particularly if you expect the US dollar to weaken.

Management will use a quantitative approach to determine the fund’s holdings, which will be broken down into a three-tiered structure. Large countries with liquid bonds, such as Brazil and Mexico, will be grouped in the top tier, which will have initial base weightings of 11.1 percent. The next tier, including countries such as South Africa and Turkey, will be weighted at 7.4 percent. The bottom tier, with countries such as Chile and Russia, will carry base weightings of 3.7 percent apiece. The fund will be actively managed, allowing its decision-makers to overweight promising markets and avoid troubled ones.

Launched with $125 million in assets, the fund has already grown to a market cap in excess of $140 million. That’s extremely impressive for a fund barely a week old. Along with the fact that the fund is averaging more than 300,000 shares in daily volume, this is clear indication that this idea is particularly popular with investors. With an expense ratio of 0.55 percent, it looks like a great play on the growth of emerging markets.