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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

1

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