*

Brazil's fiscal package to be announced Thursday morning -

Labor

Minister

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Mexican peso pinned at lowest level in more than two years

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Latam FX down 1.1%, stocks off 1.9%

(Updates with mid-session trading)

By Pranav Kashyap and Shashwat Chauhan

Nov 27 (Reuters) -

The Brazilian real dropped to a nearly 4-1/2 year low on

Wednesday on expectations that the government will announce

income tax exemptions that would reduce revenue.

Brazil's real almost hit the May 2020 record low of

5.97 against the greenback, before trading down 1.76% at 5.91

per dollar.

The local benchmark stock index, Bovespa, slid

1.36%.

Finance Minister Fernando Haddad is expected to announce

tax cuts in a

televised address

at 8:30 p.m. (2330 GMT) local time on Wednesday.

A source familiar with the matter said on condition of

anonymity that Haddad is

expected to announce

an income tax exemption for individuals earning up to 5,000

reais ($850) per month, up from the current threshold of 2,824

reais.

Labor Minister Luiz Marinho said the full package of

fiscal measures is expected to be unveiled on Thursday morning.

"Some market participants see this as a nonsense

approach. It's going to be extremely challenging to see a better

fiscal picture if that they implement those tax cuts," said

Andres Abadia, chief Latam economist at Pantheon Macroeconomics.

Mexico's peso pared earlier losses to trade barely

changed at 20.63 per dollar. The Bank of Mexico slightly raised

its 2024 economic growth forecast while holding its forecast for

2025.

President Claudia Sheinbaum said Mexico would retaliate if

U.S. President-elect Donald Trump followed through with his

proposed 25% across-the-board tariff that her government warned

could kill 400,000 U.S. jobs.

"With the Trump administration pledging to implement

tariffs, the global growth narrative has also been negatively

impacted. Trade wars are now a concern in the minds of

investors," said Juan Perez, director of trading at Monex USA.

In Colombia, two government sources said it will cut the

budget for this year by 28.4 trillion pesos ($6.44 billion) due

to lower-than-expected tax revenue.

The peso reversed early losses and was up 0.3% in

light trading.

Latin American assets have run into turbulence in November,

with the currencies of Mexico and Brazil among the worst

performers in emerging markets as investors mull the

implications of Trump's policies on trade, tariffs and

immigration.

Continued repricing of the Federal Reserve's interest rate

path has also helped the dollar globally, weakening EM

currencies.

Meanwhile, U.S. consumer spending increased solidly in

October, suggesting that the economy maintained its strong pace

of growth early in the fourth quarter, but progress lowering

inflation appears to have stalled in the past months.

MSCI's index for Latin American currencies

fell 1.1%, while a gauge for stocks lost 1.9%.

JPMorgan upgraded Mexican equities to "overweight" from

"neutral" on the back of strong U.S. growth but cut Brazilian

equities, citing slower growth in China amid emerging pressures

from Trump's tariff policy.

Credit rating agency Moody's upgraded El Salvador's credit

rating to 'B3', saying the Central American nation's credit

profile benefited from recent a liability management operation.

Key Latin American stock indexes and currencies:

Equities

Latest Daily % change

MSCI Emerging Markets 1088.51 0.15

MSCI LatAm 2035.56 -1.9

Brazil Bovespa 128161.7 -1.36

Mexico IPC 49723.09 0

Chile IPSA 6578.85 0.31

Argentina MerVal 2199071.3 -2.36

Colombia COLCAP 1397.61 0.46

Currencies

Latest Daily % change

Brazil real 5.912 -1.76

Mexico peso 20.6353 -0.05

Chile peso 977.1 -0.04

Colombia peso 4385 0.31

Peru sol 3.7482 0.39

Argentina peso 1,007.5 0.00

(interbank)

Argentina peso 1,105.0 2.64

(parallel)