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Chile's economic activity up 1.1% in May, below forecasts

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Brazil's Petrobras hikes jet fuel prices by 3.2%

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Latin American stocks down 0.5%, currencies off 1%

(Updated at 03:42 p.m. ET/1942 GMT)

By Johann M Cherian and Shristi Achar A

July 1 (Reuters) - Currencies across most resource-rich

Latin American countries edged lower on Monday following

weaker-than-expected data from the region's major economies,

while Brazil's real fell to over two-year lows.

MSCI's index tracking Latam currencies fell

1% against the dollar as markets awaited key U.S. employment

data later this week.

The real gave up early gains to shed 0.9%, trading at

levels of 2-1/2 years ago, after notching its largest quarterly

loss since the COVID-19 pandemic on Friday.

A director of Brazil's central bank said on Monday that if

fiscal policy is always expansionary, it puts a lot of pressure

on the floating exchange rate or monetary policy, making

disinflation more costly. Data released on Friday showed

government debt rose to 76.8% of gross domestic product in May

from 76.3% in April.

"The primary deficits we have been seeing are not an

exception to the general rule; deficits are in fact expected for

the foreseeable future," strategists at Citigroup noted.

Mexico's peso edged 0.1% lower, extending declines in

June when the currency notched its biggest quarterly drop since

the pandemic. A survey showed business activity in June stood at

51.1, a notch lower than 51.2 in the prior month.

Political uncertainty has raised concern about fiscal

sustainability, central bank independence in Brazil and that

Mexico's President-elect Claudia Sheinbaum might undertake

judicial reforms.

Chile's peso lost 0.6%. An index tracking domestic

economic activity ticked up 1.1% in May on an annual basis,

below expectations of 2.8%.

"The ongoing drag from still-tight financial conditions, and

temporary issues in key sectors, have put a lid on the recovery

in recent months. Still, the persistent sluggishness of

confidence indicators suggests the upturn will remain sub-par by

previous standards," said Andres Abadia, chief Latin America

economist at Pantheon Macroeconomics.

Peru's sol rose 0.1% on higher copper prices and

better-than-expected manufacturing activity data out of top

consumer China.

In equities, MSCI's index tracking local equity indexes

fell 0.5%, though Brazil's Bovespa added

0.5%.

Petrobras gained 1.5% after the state-run oil

giant raised jet fuel prices to distributors by an average of

3.2%.

Mexico's main stock index jumped 0.9%, with Grupo

Mexico up 2.3% on news that miner Southern Copper ( SCCO )

will likely finish building its Tia Maria copper

project in southern Peru in up to two years and then begin

production in 2027.

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1086.04 -0.02

MSCI LatAm 2167.24 -0.54

Brazil Bovespa 124589.88 0.55

Mexico IPC 52933.48 0.94

Chile IPSA 6383.60 -0.47

Argentina MerVal 1584967.04 -1.634

Colombia COLCAP 1380.90 0.31

Currencies Latest Daily %

change

Brazil real 5.6431 -0.94

Mexico peso 18.3590 -0.16

Chile peso 946.2 -0.62

Colombia peso 4133.5 0.37

Peru sol 3.8252 0.10

Argentina peso (interbank) 913.0000 -0.11