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EMERGING MARKETS-Latam currencies drop, Brazil real pulls away from session lows

    * Brazil tax reform unlikely to pass, lawmaker says
    * Citi sees Brazil's real trading at 5.32 by year-end
    * Mexican, Colombian peso hit by tumbling oil prices
    * Peruvian sol up as Las Bambas mine roadblock lifted 

 (Adds analyst comments, updates prices throughout)
    By Susan Mathew and Shreyashi Sanyal
    Aug 19 (Reuters) - Latin American currencies fell on
Thursday as the dollar retained its strength following U.S.
Federal Reserve minutes that suggested stimulus tapering may
start this year, while Brazil's real eased away from session
lows. 
    The real hit more than three-month lows earlier in
the session, and was last trading at 5.4177 to the dollar, with
gathering political and fiscal headwinds weighing on the
currency. 
    The deputy speaker of Brazil's lower house of Congress,
Marcelo Ramos, said an income tax proposal that would introduce 
a 20% tax on company dividends is unlikely to pass.
  
    Ramos also noted the apparent abandonment of fiscal
austerity policies in the country due to President Jair
Bolsonaro's focus on increasing spending to win re-election next
year as his popularity tumbles.
    "The likelihood of passing a bill with a decrease of tax
collection is increasing," strategists at Citi said. 
    They also noted rising power generation costs on top of
already-existing fiscal risks related to the increase of boosted
cash-transfer social programs. These could impact inflation as
growth expectations, they said. 
    But they see the real trading at 5.32 per dollar by year-end
on rising commodity prices and a weak currency resulting in a
robust trade surplus in 2021.      
    Brazil stocks rose 0.6%, snapping a three-day losing
streak after hitting near five-month lows earlier in the
session. 
    Brazilian prosecutors asked a bankruptcy court on Wednesday
to compel miners Vale and BHP Group to fully pay off
their Samarco joint venture's 50.7 billion reais ($9.47 billion)
debt.
    Oil major Petrobras weakened 0.7% following a
decline in crude prices.     
    This also saw currencies of crude exporters Mexico
and Colombia drop around 0.7% and 0.3% respectively.  
    Mexico created a new debt instrument known as "Bonde F," a
development bond, Deputy Finance Minister Gabriel Yorio said on
Wednesday.
    Mexican stocks were set for their worst session in
three weeks, while MSCI's index of Latam stocks
hit April lows as stocks were knocked by growth and U.S.
stimulus tapering worries.
    "The latest tumble in emerging market (EM) equities,
following the tapering discussion in yesterday's FOMC minutes,
adds to what has been a relatively poor year for them so far,"
said Thomas Mathews, markets economist at Capital Economics. 
    "We don't expect EM equities, as a whole, to rack up big
gains over the next few years thanks in part to the spillovers
of lower growth in China," Mathews added.
    Peru's sol bucked the gloom, rising 0.3% as residents
 near the Las Bambas copper mine in the Peruvian Andes lifted
the blockade of a road used to transport the red metal after
receiving overtures from President Pedro Castillo's new
government. Peru is the world's second-biggest copper producer.

    
    Key Latin American stock indexes and currencies at 1547 GMT:
    
         Stock indexes                 Latest    Daily %
                                                 change
 MSCI Emerging Markets                  1231.48    -2.39
 MSCI LatAm                             2357.41    -2.03
 Brazil Bovespa                       117360.32     0.62
 Mexico IPC                            51164.41    -1.58
 Chile IPSA                             4310.20    -0.73
 Argentina MerVal                      66143.14   -1.418
 Colombia COLCAP                        1325.52    -0.03
                                                        
            Currencies                 Latest    Daily %
                                                 change
 Brazil real                             5.4182    -0.83
 Mexico peso                            20.1710    -0.64
 Chile peso                               786.5     0.08
 Colombia peso                             3867    -0.50
 Peru sol                                4.0937    -0.23
 Argentina peso (interbank)             97.2800    -0.02
                                                 
 Argentina peso (parallel)                178.5     1.96
                                                 
 
 (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru;
Editing by Marguerita Choy and Will Dunham)
  
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