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EMERGING MARKETS-Brazil's real lags Latam FX as budget woes, COVID concerns mount

    * Latam FX still up for the week
    * Brazil budget deficits seen for next three years
    * Chile's peso best weekly performer, up 1.7%

    By Ambar Warrick
    April 16 (Reuters) - Brazil's real led losses across Latin
American currencies on Friday as the COVID-19 pandemic raged on
and the government forecast three straight years of massive
budget deficits, highlighting the long road to economic
normalcy.
    The real fell about 0.8% in early trade, as spiking
infection rates kept local hospitals stuffed. The country is the
third worst hit by the pandemic in the world, after India and
the United States, but has the highest daily fatalities.

    Brazil's Economy Ministry projected budget shortfalls in
each of the next three years of more than 100 billion reais ($18
bln), owing to continued overspending due to the pandemic.

    Latin America's largest economy is also struggling with an
impasses over the country's 2021 budget, which was approved by
Congress last month but is being revised after it emerged it
could break one of the government's key fiscal rules. 
    "While aid programmes are arguably necessary, owing to the
continued escalation of the COVID-19 crisis, the lack of
progress toward extending the measures highlights how poorly the
administration is dealing with the Congress," analysts at TS
Lombard wrote in a note.
    "It also highlights the risk that the Congress will continue
to push for more spending." 
    Still, the real was set for mild weekly gains, as it and
most other regional currencies benefited from a second week of
dollar weakness and falling U.S. Treasury yields.
    Despite the easing pressure, most emerging market currencies
are still trading down for the year, as initial spikes in yields
spurred large outflows from risk-exposed debt.
    Latin American assets have lagged their broader peers due to
a damaging second wave of infections in the region, as well as
growing concerns over fiscal strength in major economies. 
    Chile's peso fell 0.2% on Friday but was set to
outpace its peers this week as improving U.S. and Chinese
economic data pointed to a strong buildup in demand for copper,
the country's top export.
    Mexico's peso and Colombia's peso also
strengthened this week as expectations of a demand recovery
pushed up oil prices.
    Latam stocks fell in early trade, with most of them set for
mild weekly gains.
    Among individual movers, Brazilian oil and gas firm
Petrobras fell 0.6%, on reports that incoming Chief
Executive Joaquim Silva e Luna has endorsed four career
executives to head up key company divisions rather than bringing
in more outsiders.
     
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1346.80               0.43
                                        
 MSCI LatAm                    2386.03              -0.37
                                        
 Brazil Bovespa              120606.59              -0.08
                                        
 Mexico IPC                          -                  -
                                        
 Chile IPSA                    4968.67               0.54
                                        
 Argentina MerVal                    -                  -
                                        
 Colombia COLCAP               1316.91              -0.37 Currencies             Latest     Daily % change
 Brazil real                    5.6710              -0.79
                                        
 Mexico peso                   19.9696              -0.18
                                        
 Chile peso                      699.4              -0.24
                                        
 Colombia peso                 3598.25               0.34
 Peru sol                        3.625              -0.01
                                        
 Argentina peso                92.7700              -0.04
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru)
  
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