EMERGING MARKETS-Latam FX firm, Pemex move puts Mexico's credit rating in focus

    * Brazil's real extends gains to third straight session 
    * Pemex move worsens credit outlook for Mexico - Citi
    * Colombia eyes tax reform bill next week 

 (Adds comments, updates prices throughout)
    By Susan Mathew and Shreyashi Sanyal
    March 19 (Reuters) - Most Latin American currencies joined
broader emerging market peers in the black on Friday, looking to
end a week dominated by monetary policy surprises on a high
    Mexico's peso inched up 0.1% to stay near one-month
highs and was on course to end the week with a gain of 1.2%,
while Chile's peso rose 0.9%.  
    Emerging market (EM) currencies got a boost this week from
the U.S. Federal Reserve maintaining its dovish stance, leaving
interest rates rate near zero. Low rates in the United States
bode well for high yielding currencies as the interest rate
differential makes them more appealing for carry trades. 
    With inflationary pressures driving bumper rate hikes in
Brazil and Turkey and a surprise increase by Russia, the EM
currencies index was on track to break a
four-week losing streak. 
    Brazil's real extended gains to a third
straight session, leaving it up around half a percent since last
    But with COVID-19 cases still surging in Latin America,
economic fundamentals still reeling from the pandemic, and
political worries persisting, Latam assets have lagged EM peers.
    On Thursday, Mexican state-oil firm Pemex's chief executive
said the government had agreed to absorb regular debt payments
this year for Latam's most indebted company.
    With $113.2 billion in debt as of 2020, Pemex's burden on
Mexico has seen credit rating downgrades by top agencies. 
    "This announcement shows that the strategy of the government
will continue to be to support Pemex in gradual steps, without a
significant change in its business plans, putting increased
pressure on sovereign finances," said Citi Research strategists.
    "This means a continued worsening credit outlook for the
sovereign and the need to find additional resources, most likely
through a fiscal reform to be presented in September, together
with the 2022 budget."
    In Colombia, market participants will be eyeing a tax reform
bill the government will propose to congress next week, which
would increase tax take by the equivalent of 1.5% of GDP. The
country's peso dropped 0.4%. 
    "This legislation could have a major bearing on the
country's sovereign investment grade rating," said Nikhil
Sanghani, Latin America economist at Capital Economics. 
    "Credit ratings agencies have stated that pushing through
tax reform will be key for Colombia to maintain its investment
grade rating... And previous attempts at tax reform have often
been watered down in Congress. The same may happen once again."
    On stock markets, state-controlled Brazilian lender Banco do
Brasil fell up to 0.8%, after its chief executive
submitted his resignation on Thursday after months of pressure
for his ouster from President Jair Bolsonaro.
    Planemaker Embraer rose more than 2% after
reporting its best quarter so far during the COVID-19 pandemic.

    Key Latin American stock indexes and currencies at 1821 GMT:
         Stock indexes                   Latest    Daily %
 MSCI Emerging Markets                    1337.82     -0.71
 MSCI LatAm                               2351.68      1.22
 Brazil Bovespa                         115971.39      0.99
 Mexico IPC                              47555.33     -0.04
 Chile IPSA                               4843.34     -0.72
 Argentina MerVal                        48908.30     0.636
 Colombia COLCAP                          1322.01     -0.27
             Currencies                  Latest    Daily %
 Brazil real                               5.4643      1.86
 Mexico peso                              20.4981     -0.13
 Chile peso                                 714.1      0.84
 Colombia peso                             3556.9     -0.33
 Peru sol                                  3.7148     -0.19
 Argentina peso (interbank)               91.3500     -0.05
 Argentina peso (parallel)                    141      2.13

 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru.
Editing by Mark Potter, Kirsten Donovan)