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Brazil to seek corporate income tax adjustment in 2025
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Analysts boost Mexico GDP forecast, c.bank survey shows
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MSCI Latam FX index down 1.2%, stocks down 1%
(Updates with afternoon trading)
By Pranav Kashyap and Johann M Cherian
Dec 2 (Reuters) - Most Latin American currencies started
the last month of the year on a dour note on Monday, with the
Brazilian real continuing its downward trajectory following a
fiscal package that failed to satisfy market expectations.
The Brazilian real fell 1.6% to 6.06 against the U.S.
dollar, hovering near record lows it reached on Friday. The
local benchmark equities index also lost 0.1%.
The currency experienced its steepest weekly decline in
nearly five months on Friday as the anticipated fiscal package
announced last week, which included a tax exemption,
disappointed investors and triggered a sell-off in Brazil's
public markets.
On the day, the country's deputy finance minister said the
government has committed to adjusting corporate income tax as
part of broader reform discussions, adding that a debate on the
matter would likely happen in 2025.
Expectations of fiscal instability in the country has
weighed on the real despite the local central bank hiking
interest rates.
"For now, the (central bank) will continue with its
tightening cycle in the next few months and continue to support
the BRL in the face of worries about fiscal policy," strategists
led by Thierry Wizman at Macquarie said.
"But rate hikes are likely to be partly reactive to a higher
USD/BRL nonetheless, and their effectiveness will be a far cry
from being enough to reverse the BRL depreciation that's taken
place since April."
Brazil's incoming central bank chief, Gabriel Galipolo,
noted that the current economic scenario suggests "higher
interest rates for longer," and emphasized that exchange rate
policy would continue to focus on intervening only during times
of dysfunction.
More broadly, MSCI's index for Latin American currencies
dropped 1.2%, while the stocks index
was down 1% on the day.
Further dampening sentiment, U.S. President-elect Donald
Trump demanded that BRICS nations, including Brazil, commit to
not creating or supporting a currency to replace the dollar,
threatening 100% tariffs as a consequence.
The Mexican peso came off session lows and was last
down at 20.39 to the greenback.
Mexico's economic calendar is relatively light this week,
with only addresses from the finance minister and central bank
head scheduled for Thursday.
The local equities index rose 1.3% and touched a
one-week high. A survey showed private sector analysts raised
their expectations for economic growth in the region's second
largest economy to 1.53% this year, up 13 basis points from
their prior forecast a month earlier.
Currencies of copper exporters Chile and Peru
weakened 0.5% and 0.1% respectively as prices of the red metal
slipped.
Separately, data out of Chile showed economic activity in
the world's largest copper producer rose 2.3% year-over-year in
October, slightly below the expectations for 2.5%.
Among other bourses in the region, Argentina's Merval index
rose 1.6%, while Chilean stocks added 0.9%.
Key Latin American stock indexes and currencies:
Latin American market
prices from Reuters
MSCI Emerging Markets 1086.5 0.74
MSCI LatAm 1978.28 -1.02
Brazil Bovespa 125572.87 -0.08
Mexico IPC 50441.37 1.26
Chile IPSA 6639.86 0.96
Argentina Merval 2295431.5 1.644
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Colombia COLCAP 1394.1 0.14
Brazil real 6.069 -1.61
Mexico peso 20.396 -0.17
Chile peso 977.93 -0.49
Colombia peso 4457.5 -0.56
Peru sol 3.7425 -0.12
Argentina peso (interbank) 1011 0.00
Argentina peso (parallel) 1080 3.57