EMERGING MARKETS-Brazil real slide 1% to lead losses in Latam

* Tax reform in Brazil is unlikely to succeed – Lower House dep. speaker * Citi sees Brazil’s real trade at 5.32 at year-end * Mexican, Colombian peso hit by falling oil prices * Peruvian sun clears as roadblock at Las Bambas mine lifted By Susan Mathew 19 August (Reuters) – Brazil’s real fell 1 % to lead losses among Latin American currencies on Thursday as the dollar maintained its strength after minutes from the US Federal Reserve, suggesting that stimulus may begin this year. The real hit over three-month lows and eventually traded at 5,408 to the dollar, with political and fiscal headwinds picking up the currency. The vice-president of Brazil’s lower house of Congress, Marcelo Ramos, said an income tax reform introducing a 20% tax on corporate dividends is unlikely to pass. He also noted the apparent abandonment of fiscal tightening in the country due to President Jair Bolsonaro’s focus on increasing spending to win re-election next year as his popularity tumbles. “The likelihood of passing a bill with a drop in tax collection is increasing,” said strategists at Citi. They also note rising energy production costs on top of pre-existing fiscal risks associated with the rise of a boosted social transfer program. These could affect inflation as growth expectations, they warn. But they see the real trade at 5.32 per. Dollar at year-end on rising commodity prices and a weak currency resulting in a robust trading surplus in 2021. Brazil stock fell 0.9% to hit near five-month lows, weakening for a seventh session in eight. Mining giant Vale fell 4.4% as iron ore prices fell by 7%. Steel producer Usiminas dropped 3.2% Brazilian prosecutors on Wednesday requested a probate court to force miners Vale and BHP Group to repay in full their Samarco joint venture debt of 50.7 billion reais ($ 9.47 billion). Oil major Petrobras tracked a fall of over 2% in crude prices. This also saw the currencies of crude exporters Mexico and Colombia fall by around 0.3% and 0.6% respectively. Mexico created a new debt instrument known as ‘Bonde F’, a development bond, Deputy Finance Minister Gabriel Yorio said on Wednesday. Mexican stocks were set for their worst session three weeks, while MSCI’s index for Latam stocks hit recessions in April as stocks were hit by growth and U.S. stimulus declining concerns. Peru’s sun broke the darkness and rose 0.3% as residents near the Las Bambas copper mine in the Peruvian Andes lifted the blockade of a road used to transport the red metal after receiving overtures from President Pedro Castillo’s new government. Peru is the world’s second largest copper producer. Major Latin American stock indices and currencies at 1410 GMT: Equity indices Latest daily percentage change MSCI Emerging Markets 1233.18 -2.25 MSCI LatAm 2340.96 -2.72 Brazil Bovespa 115619.85 -0.88 Mexico IPC 51154.66 -1.6 Chile IPSA 4318.30 -0.54 Argentina MerVal – -Colombia COLCAP 1318.8 -0.54 Currency Latest daily% change Brazil real 5.4089 -0.66 Mexico peso 20.1133 -0.35 Chile peso 791.7 -0.58 Colombia peso 3869.09 -0.56 Peru sol 4.0924 0.25 Argentina peso 97.2900 -0.03 (interbank) (Report by Susan Mathew in Bengaluru; edited by Marguerita Choy)

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