* Brazil's public sector debt hits 86.5% of GDP * Colombian peso extends four-day winning streak * Chile's stock index slides as manufacturing activity falls * LatAm FX index logs biggest monthly decline since March (Updates prices throughout, adds comments) By Sagarika Jaisinghani and Shreyashi Sanyal Aug 31 (Reuters) - The Brazilian real slipped on Monday as data showed the country's finances deteriorated further due to the COVID-19 pandemic, while Colombia's peso held steady after an expected cut in interest rates. The real was down 1.2% against a weaker dollar as the health crisis pushed Brazil's public sector debt to a record 86.5% of gross domestic product in July, while its primary deficit, which excludes interest payments, was 81.1 billion reais ($15 billion). Analysts at Rabobank said even as COVID-19 infections and fatalities rose, the rolling averages of new cases have been losing steam, and they expect the real to gain some lost ground by the end of the year. "Despite volatility, we still see the USD-BRL trading at 5.25 by year end and at 4.90 by end-2021." The currency has plunged 26.6% to record lows in 2020 as the pandemic hammered growth in Latin America's biggest economy. On Friday, Brazil's Treasury raised the public debt ceiling for 2020 to account for the surge in emergency spending to combat the health crisis. An index of Latin American currencies fell 0.3% and clocked its biggest monthly percentage decline since March, when the onset of the pandemic triggered a flight from risky assets. The index has severely underperformed its global counterpart , which rose for a fifth straight month amid aggressive global stimulus and hopes of a post-pandemic economic rebound. The Colombian peso gained 0.3% versus the greenback, rising for a fourth straight session after the central bank cut rates by 25 basis points. Analysts said the rate cut is likely to be the last in an easing cycle meant to boost the economy amid the coronavirus. In Argentina, the peso eased as investors awaited the results of the government's debt deal later in the day, with expectations running high that the tender received huge creditor support. A strong deal is key for the major grains producer to drag itself out of default and revive an economy in its third year of recession. The Chilean peso firmed about 0.5%, but the stock index tumbled 1.8% to its lowest level in nearly three months as data showed manufacturing activity fell 7.2% in July, driven by a decline in food production. A 2.2% slide in Mexico's stock index also weighed on a basket of Latin American equities, putting it on course for its first monthly decline in five. Mexico's peso shed 0.5%. Key Latin American stock indexes and currencies at 1936 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1102.81 -1.68 MSCI LatAm 1949.30 -2.41 Brazil Bovespa 100389.04 -1.72 Mexico IPC 36979.92 -2.15 Chile IPSA 3775.54 -2.54 Argentina MerVal 46849.36 0.976 Colombia COLCAP 1210.84 -1.25 Currencies Latest Daily % change Brazil real 5.4799 -1.23 Mexico peso 21.8653 -0.52 Chile peso 776.5 0.24 Colombia peso 3732.23 0.32 Peru sol 3.5418 -0.26 Argentina peso (interbank) 74.1700 -0.23 Argentina peso (parallel) 132 3.03 (Reporting by Sagarika Jaisinghani and Shreyashi Sanyal in Bengaluru; Editing by David Gregorio and Leslie Adler)
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