*

Bogota recalls ambassador from US, political clash

escalates

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Argentine peso closes at record low

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Argentina central bank signs currency swap deal with the

US

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Argentinian peso closes at record low

*

LatAm FX up 0.8%, stocks up 1.2%

(Updates with afternoon trading)

By Niket Nishant, Johann M Cherian and Purvi Agarwal

Oct 20 (Reuters) -

Colombia's peso weakened against the U.S. dollar on Monday

and its stocks inched lower as tensions with Washington over

tariffs and drugs cast a shadow on the country's assets, while

investors also focused on Argentina ahead of an upcoming

election.

The oil exporter

recalled its ambassador

from Washington, intensifying the feud stemming from U.S.

strikes on vessels.

It also put a spotlight on how quickly political

frictions can unsettle sentiment amid investor interest in

diversifying their holdings with LatAm assets.

Commodities form the backbone of exports for much of Latin

America, leaving the region highly exposed if political tensions

disrupt supply chains.

The sharp escalation was reflected in the 1.4% drop in the

local peso against the dollar, while equities

dipped 1.4%.

Citigroup downgraded Colombia credit to "neutral" from

"overweight," citing fragility from the fiscal and political

outlook.

Argentina's central bank said it signed a deal for a $20

billion exchange rate stabilization agreement with the U.S.

Treasury, six days ahead of a key midterm election.

Argentina's peso fell 1.7%, closing at a record

low. Its stock index slid 0.6% after four consecutive

weeks of gains. Dollar bonds fell more than 1 cent on the dollar

each.

Markets are hawk-eyed on the October 26 election, as

concerns remain over how long President Javier Milei's austerity

agenda could continue, especially after a defeat in September's

provincial elections.

"We would expect greater FX volatility if the election

results were to signal a shift in patience amongst the

electorate with the current economic policies," Morgan Stanley

economists said.

"Independent of the (election) outcome, a stable macro

outcome likely involves a weaker currency."

Separately, Argentina's finance ministry

began

negotiations for a sovereign debt buyback operation to

reduce financing costs and support investment in education.

On the flip side, Brazil's real gained 0.7% while

its stocks hit a two-week high. Mexican stocks

fell 0.1% ahead of the third-quarter earnings season.

Rising copper prices lifted the currency in Chile

0.5%, the world's largest copper exporter. Stocks

gained 0.3%.

MSCI's index tracking Latin American equities

hit its highest in two weeks and a parallel

gauge of regional currencies hit its highest in

a week and a half.

Separately, data from China showed a surge in soybean

shipments from Argentina and Brazil filling in for U.S. exports

as China imported no soybeans from the U.S. in September, the

first time in nearly seven years.

Still, relying too much on China could be problematic,

especially as the sector grapples with its own problems of weak

domestic consumption and property market struggles.

Ratings agency Moody's downgraded China Vanke as

the embattled property developer grapples with an ailing

liquidity crisis.

Elsewhere, investors welcomed the Bolivian presidential

election win for centrist candidate Rodrigo Paz but cautioned he

now faces a major challenge fixing the economy and will likely

have to soften his resistance to IMF support.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

MSCI Emerging Markets 1383.3 1.59

MSCI LatAm 2510.16 1.22

Brazil Bovespa 144592.31 0.83

Mexico IPC 61660.25 -0.14

Chile IPSA 9159.75 0.33

Argentina Merval 1977959.2 -0.58

1

Colombia COLCAP 1897.42 -1.39

Brazil real 5.3703 0.7

Mexico peso 18.4061 -0.24

Chile peso 950.66 0.54

Colombia peso 3883.22 -1.41

Peru sol 3.3713 0.2

Argentina peso (interbank) 1475 -1.72

Argentina peso (parallel) 1485 -1.37