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EMERGING MARKETS-Colombia's peso down after tax reform withdrawal, sol tumbles

    * Colombian President withdraws proposed tax reform
    * Brazil's manufacturing sector decelerates 
    * Chile's peso outperforms as economic activity jumps in
March

 (Recasts with sol, updates prices)
    By Shashank Nayar and Ambar Warrick
    May 3 (Reuters) - Colombia's peso led losses across Latin
American currencies on Monday, hitting a six-month low after the
government withdrew a controversial proposed tax reform over the
weekend, while Peru's sol tumbled on more concerns the country
may elect a socialist president.
    Colombia's peso dropped 1.3% after President Ivan
Duque said he would withdraw a tax reform plan amid deadly
protests and widespread lawmaker opposition.
    Since the tax reform, which originally sought to raise more
than $6 billion, was sent to Congress on April 15, the peso has
depreciated 5.5%.
    Analysts also questioned the odds of a possible ratings cut
which would place Colombia debt instruments below investment
grade in case the policy is totally shelved.
    "The rating agencies may question not only the path of debt
dynamics but also future political commitment/ability to address
the challenges down the road —a key consideration when deciding
a cut from investment grade," wrote analysts at J.P. Morgan in a
note.
    Colombian stocks plunged 2.8%, while MSCI's index
of Latin American stocks gained 0.3%.
    The Peruvian sol tumbled 0.8% to near record-low
levels after presidential election front-runner, socialist Pedro
Castillo, vowed to curb foreign firms "looting" the Andean
nation's mining wealth.
    Concerns over a wave of support for socialist policies in
Peru have rattled its financial markets this year, with the sol
tumbling to record lows last month.
    Still, broader Latam currencies have benefited from recent
weakness in the U.S. dollar and Treasury yields, having marked
strong gains in April. 
    The Chilean peso surged 0.9%, leading gains across
Latam after economic activity rose at its strongest
pace since 2018 in March, an early sign of green shoots in the
economy of the world's top copper producer.
    Brazil's real was flat after data showing that
growth in the country's manufacturing sector slowed in April.
The data also showed prices charged to customers rose towards
their recent historic highs, signaling higher inflation
levels.
    Mexico's peso rose 0.2%, tracking a weaker dollar and
a jump in oil prices on optimism over a strong demand rebound in
countries including the United States and China. 
    The Argentine peso dropped 0.1% after coronavirus
cases hit 3 million on Sunday, highlighting concerns over a
damaging wave of COVID-19 infections across Latin America.

    Foreign net flows to emerging market equity and debt
portfolios picked up in April, with flows to Chinese equities
taking a large share of the total, data from the Institute of
International Finance showed on Monday.
    
    Key Latin American stock indexes and currencies:
    
                              Latest      Daily % change
 MSCI Emerging Markets         1339.31                -0.62
                                        
 MSCI LatAm                    2383.46                 0.33
                                        
 Brazil Bovespa              119135.03                  0.2
                                        
 Mexico IPC                   48430.76                 0.88
                                        
 Chile IPSA                    4580.68                 2.41
                                        
 Argentina MerVal             48816.86               -0.488
                                        
 Colombia COLCAP               1215.49                -2.81 Currencies             Latest      Daily % change
 Brazil real                    5.4317                -0.03
                                        
 Mexico peso                   20.1866                 0.20
                                        
 Chile peso                      703.7                 0.88
                                        
 Colombia peso                  3801.2                -1.31
 Peru sol                       3.8158                -0.84
                                        
 Argentina peso                93.6700                -0.12
 (interbank)                            
                                        
 
 (Reporting by Shashank Nayar in Bengaluru; Editing by Andrea
Ricci and Hugh Lawson)
  
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