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EMERGING MARKETS-Fiscal troubles pressure Brazil's real, Mexican peso drops 1%

    * Latam currencies fall on dollar buying
    * Colombian peso hit by weak central bank outlook

 (Updates prices, adds market details)
    By Ambar Warrick and Susan Mathew
    Feb 4 (Reuters) - Brazil's real led losses across Latin
American currencies on Thursday, and Mexico's peso fell 1% after
the Supreme Court struck down a key component of the
government's reform agenda.
    The real dropped 1.4% as fiscal worries outweighed
stimulus hopes and optimism that the government's reform agenda
was likely back on track after allies of President Jair
Bolsonaro were elected this week to head the Congress.
     "The main uncertainty at this point is whether the
government will be able to accommodate (fiscal support) under
the spending cap," wrote Citi group strategists in a note. "The
most likely scenario is public spending surpassing the limit ...
this year by 1 percentage point of GDP.
     "With that said, in the short-run, we expect Brazilian
assets to be buoyed by the aligned speeches between the new
Congress leadership and the government," they said. 
    Mexico's peso dropped 0.6% to the dollar after the
country's Supreme Court upheld an antitrust lawsuit against a
crucial part of the government's plan to reform the power
sector.
    The move would have given state-run electricity generators
an edge in the sector, and was met with criticism from private
businesses.
    Other Latin American currencies fell as positive U.S.
economic data and optimism over a bumper stimulus package drove
buying into the dollar, despite its position as a currency that
usually weakens during risk-on trade.
    Crude exporter Colombia's peso weakened despite
rising oil prices. The government's plan to vaccinate over 35
million people against the coronavirus this year could face
delays, President Ivan Duque said on Wednesday.
    Meanwhile, Colombia appointed Viviana Taboada and Mauricio
Villamizar to the central bank's board amid debate among
policymakers about whether to continue low interest rates or
guard against possible future inflation upticks. 
    "The appointments have generated criticism and could imply a
mildly dovish shift, if there is a shift at all. Both appointees
are relatively young and not very well known locally. This has
generated a stir locally since some more experienced economists
were overlooked," Citi group strategists said.
    Most Latam currencies have lagged their broader emerging
market peers this year as a second wave of COVID-19 infections
damaged economic activity and raised concerns over stretched
fiscal spending in the region.
    Colombia's central bank said that the second wave of
infections - which had spurred tighter restrictions in major
cities - will affect the country's economy throughout the
remainder of 2021 and delay its recovery.
    
    Key Latin American stock indexes and currencies:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets    1387.08     -0.4
                                   
 MSCI LatAm               2363.88     -1.1
                                   
 Brazil Bovespa         119315.09    -0.34
                                   
 Mexico IPC              44235.88     0.63
                                   
 Chile IPSA               4412.40     0.24
                                   
 Argentina MerVal        50357.10    1.002
                                   
 Colombia COLCAP          1355.99    -0.22
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.4460    -1.43
                                   
 Mexico peso              20.4100    -1.10
                                   
 Chile peso                 736.6    -0.46
                                   
 Colombia peso            3556.44    -0.64
                                   
 Peru sol                  3.6428    -0.06
                                   
 Argentina peso           87.9100    -0.11
 (interbank)                       
                                   
 
 (Reporting by Ambar Warrick and Susan Mathew in Bengaluru;
Editing by Bernadette Baum and Matthew Lewis)
  
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