October 17, 2017 / 9:24 PM / a year ago

EMERGING MARKETS-Mexico peso rallies as ministers put brave face on NAFTA talks

 (Recasts with peso gains, updates prices)
    By Miguel Gutierrez
    MEXICO CITY, Oct 17 (Reuters) - Mexico's peso surged on
Tuesday after aggressive U.S. demands appeared to have not yet
sunk hopes of reaching a new North American trade deal while
stocks in Brazil fell on worries the country's president could
face a corruption trial.
    Mexico's peso gained about 1.5 percent after
trade ministers from the United States, Canada and Mexico
wrapped up a contentious round of talks and said they would
extend a deadline to finish into early next year.
    It was the peso's biggest one-day gain in about 4-1/2 months
in what analysts said may be just a short-term rally amid
concerns that U.S. President Donald Trump could still try to
slap tariffs on Mexican-made goods. 
    "The good news is that they are sticking to talks despite
the worry of a break following the inflexible, protectionist
U.S. proposals," Banco Base analyst Gabriela Siller wrote in a
note to clients. 
    Washington's demands include forcing renegotiation of the
pact every five years, reserving the lion's share of automotive
manufacturing for the United States and making it easier to
pursue import barriers against some Canadian and Mexican goods.
    Siller warned the peso was likely to weaken in the weeks
ahead "as we hear pessimistic declarations from governments,
analysts and business groups from the three countries."
    Before its rebound on Friday, the peso had shed close to 5
percent this month on concerns that talks to revamp the 23-year
old North American Free Trade Agreement (NAFTA) could founder.
    Meanwhile, stocks in Brazil fell nearly 1 percent as
lawmakers debated whether to put President Michel Temer on trial
before the Supreme Court, a potential blow to his agenda of
market-friendly reforms.
    Traders largely expect the center-right president to
successfully dodge corruption charges, as he did with a similar
string of accusations earlier this year.
    Still, a smaller-than-expected show of support for Temer
could indicate he will struggle to pass belt-tightening
measures, such as streamlining the nation's bloated social
security system.
    Shares of planemaker Embraer SA were the biggest
decliners, dropping the most in seven months after France's
Airbus SE acquired a majority stake in Embraer
competitor Bombardier Inc's CSeries jetliner program.

    Key Latin American stock indexes and currencies at 2050 GMT:
 Stock indexes                       daily %    YTD %
                            Latest    change   change
 MSCI Emerging Markets      1125.66    -0.54    30.55
 MSCI LatAm                 2931.21    -0.68    25.23
 Brazil Bovespa            76201.25     -0.9    26.52
 Mexico IPC                50140.52     0.84     9.85
 Chile IPSA                 5483.30    -0.04    32.08
 Chile IGPA                27483.57     0.03    32.55
 Argentina MerVal          26622.40    -1.91    57.36
 Colombia IGBC             11030.57    -0.48     8.91
 Venezuela IBC               561.75     2.07   -98.23
 Currencies                          daily %    YTD %
                                      change   change
 Brazil real                 3.1680     0.12     2.56
 Mexico peso                18.7500     1.49    10.63
 Chile peso                  621.08    -0.27     7.99
 Colombia peso              2948.75    -0.60     1.79
 Peru sol                     3.244    -0.03     5.24
 Argentina peso             17.3300     0.10    -8.40
 Argentina peso               17.97    -0.39    -6.40
 (Writing by Michael O'Boyle; Editing by James Dalgleish)
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