March 27, 2019 / 3:10 PM / 4 months ago

EMERGING MARKETS-Brazil's real slumps on pension reform worries; Latam stocks slide

    By Agamoni Ghosh
    March 27 (Reuters) - Latin American currencies fell on
Wednesday to hover at their lowest levels since the start of the
year, led by a decline in Brazil's real as worries about the
prospects for the government's pension reform deepened.
    Stocks in the region also slid as risk appetite globally
remained fragile after a selloff last week triggered by fears of
slowing global growth.
    MSCI's index of Latin American currencies
fell more than 1 percent, with Brazil's real testing its
lowest levels since December 2018. 
    The real weakened 1.5 percent after a nearly unanimous vote
by lawmakers late Tuesday night to strip some presidential
budget power, a sign of growing defiance against President Jair
Bolsonaro's economic reforms.
    Additionally, leaders of 11 Brazilian political parties
announced they would push to remove changes affecting rural
retirement and payments to the elderly and disabled from the
pension reform bill, the cornerstone of Bolsonaro's economic
    "We still think 'sausage making' is in full process, where
any headlines will lead to volatility in USDBRL, and setbacks
like this one could continue in the coming months," analysts
from Citi said in a note. 
    Data showing Brazil's federal public debt rose to 3.874
trillion reais ($987 billion) in February, up 1.71 percent from
the month before, added to the pressure on the real.

    Sao Paulo-traded stocks fell about 2 percent in a
broad-based decline, with Brazilian telecommunications firm Oi
SA sliding about 1.5 percent after reporting a big
quarterly loss.
    The Mexican peso fell more than 1 percent, with
investors keeping a close eye on Pemex after official data
showed the debt-laden state oil firm imported crude oil in
February despite the new Mexican president's sharp criticism of
the previous government's authorization of foreign oil
    Mexico's government has so far announced a slew of measures
to infuse capital into the firm, which holds more than $106
billion in financial debt, including resorting to using part of
its public income stabilization fund to pay some of its debt.
    "These moves on the positive side indicate that perhaps the
government is starting to realize the scale of the problem, but
it also points to tinkering with the fiscal stance, by
transferring liabilities onto the government's balance sheet,"
said Christian Lawrence, senior market strategist, Latam FX, at
    Chile's peso fell to its lowest levels since the
first week of January, while stocks on the IPSA index
 fell 0.3 percent, led by a drop in shares of
retailer Falabella.
    Key Latin American stock indexes and currencies at 1440 GMT
 Stock indexes                        daily %
                             Latest    change
 MSCI Emerging Markets       1046.04    -0.42
 MSCI LatAm                  2678.49     -2.7
 Brazil Bovespa             93036.66    -2.38
 Mexico IPC                 42880.34     0.13
 Chile IPSA                  5175.06    -0.31
 Argentina MerVal           32166.55    -1.41
 Colombia IGBC              13145.16    -0.18
 Currencies                           daily %
 Brazil real                  3.9397    -1.87
 Mexico peso                 19.3380    -1.22
 Chile peso                    683.4    -0.41
 Colombia peso               3182.96    -0.91
 Peru sol                      3.313    -0.21
 Argentina peso              43.4500    -1.84

 (Reporting by Agamoni Ghosh
Editing by Paul Simao)
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