February 18, 2019 / 3:01 PM / 3 months ago

EMERGING MARKETS-Latam FX weak, Brazil's real drops ahead of pension reform plans

    By Susan Mathew
    Feb 18 (Reuters) - Latin American currencies weakened
against the U.S. dollar on Monday, with Brazil's real
underperforming its peers ahead of anticipated pension reforms
to be presented to congress later this week.
    The real slipped 0.8 percent, underperforming its
peers, as President Jair Bolsonaro is expected to face
opposition from congress, possibly delaying the passage of
reforms seen as essential for shoring up the economy.

    "Pension reforms are considered crucial by the market with
respect to the real outlook... There are indications that any
reform will progress very slowly in congress," said Esther
Reichelt, an FX analyst at Commerzbank.
    "Any negative news on this front is always negative for the
currency because there is always a concern that this could
trigger a rating downgrade," she said.
    On Friday, Bolsonaro's close aide and secretary general,
Gustavo Bebianno, was alleged to have misused campaign funds -
the latest controversy to taint Bolsonaro's anti-corruption
image after his son Senator Flavio Bolsonaro was accused of
money laundering.
    "The corruption allegations may be weighing on the Brazilian
real on the margin, but I think the focus this week will remain
on the pension reform. The recent weakness could just reflect
jitters ahead of the details ahead of the reforms," said Edward
Glossop, a Latam economist with Capital Economics.
    The president's pledge of zero tolerance for graft, after
years of political bribery investigations that rocked Brasilia,
was one of his strong campaign appeals. 
    Brazil's benchmark stock index also fell, shedding
0.8 percent, with most sectors in the red. 
    While financials were the biggest weight on the index,
shares of state power company Eletrobras 
and Petrobras Distribuidora, a distribution company
of state oil company Petrobras <PETR$.SA> were the biggest
losers. 
    Among other currencies, the Mexican peso cut some
losses to trade slightly lower against a weaker dollar, while
Chile's peso tracked the prices of the country's main
export, copper, higher.
        
    Key Latin American stock indexes and currencies at 1441 GMT:
    Stock indexes             Latest    Daily %
                                         change
 MSCI Emerging Markets         1037.14      0.63
                                        
 MSCI LatAm                    2862.64      -0.7
                                        
 Brazil Bovespa               96770.48     -0.77
                                        
 Mexico IPC                          -         -
                                        
 Chile IPSA                    5393.96     -0.11
                                        
 Argentina MerVal             37512.41      0.11
                                        
 Colombia IGBC                       -         -
                                        
                                                
       Currencies             Latest    Daily %
                                         change
 Brazil real                    3.7294     -0.74
                                        
 Mexico peso                   19.2430     -0.04
                                        
 Chile peso                      660.8      0.15
                                        
 Colombia peso                 3135.84     -0.14
 Peru sol                            -         -
                                        
 Argentina peso                      -         -
 (interbank)                            
                                        
 

 (Reporting by Susan Mathew in Bengaluru; Editing by Bernadette
Baum)
  
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