*

Mexico faces credit risk from higher deficits, more debt -

Fitch

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Brazil's Suzano discusses higher bid for International

Paper ( IP )

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Argentina stocks at record highs

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Latam stocks down 0.8%, FX off 0.4%

(Updated at 1924 GMT)

By Shashwat Chauhan and Johann M Cherian

May 21 (Reuters) - Mexican stocks slid over 1%, leading

declines across Latin American on Tuesday as concerns around the

political outlook in the region's second-largest economy, and

the timing of the U.S. Federal Reserve's first interest rate cut

dominated sentiment.

As of 1924 GMT, MSCI's index for Latin American stocks

dropped 0.8%, with Mexico's main index on

track for its biggest one-day drop in over three weeks.

Following signs that Banxico will keep interest rates steady

at its next meeting, focus is squarely on the outcome of local

presidential elections on June 2, where ruling party candidate

Claudia Sheinbaum, holds a lead over her closest rival, a poll

showed.

Ratings agency Fitch said the oil exporter's next

government is facing three main risks to its sovereign credit

rating, including the possibility that larger fiscal deficits

lead to higher public debt.

"People might be a little risk averse for a few months

naturally because of the political change and the lack of

clarity on if the new President will follow the same ideology as

the previous President," said Eduardo Ordonez Bueso, EM debt

portfolio manager at BankInvest.

The country's main index has lost over 1% year-to-date, hurt

by demand denting interest rates, as the domestic central bank

has held back from reducing interest rates after March on

concerns of underlying price pressures flaring up.

Among single stocks, Javer surged 8.2%, a day

after the real estate company Vinte reported that it seeks to

buy up to 100% of the housing construction firm's shares through

a public acquisition offer (OPA).

Brazilian stocks shed 0.1%, weighed by a 3.7% drop

in Suzano after a report said that the pulp and paper

company has been in talks with its advisers about sweetening its

$15 billion offer for International Paper ( IP ).

On the other hand, Argentina's Merval index added

2.5% and was trading at a record high.

On the currencies front, MSCI's index for regional FX

slipped 0.4%, with oil exporter Mexico's peso

dipping 0.4%, as crude prices took a hit.

Copper exporter Peru's sol climbed 0.6%, on track for

its biggest daily jump in nearly two weeks as copper prices

traded at record highs, while Brazil's real slipped 0.2%.

Markets in the world's largest copper producer, Chile, were

shut on account of a public holiday.

Currency markets around the world traded with prudence as

Fed officials struck a cautious tone regarding monetary policy,

ahead of minutes from the central bank's last policy meeting due

on Wednesday.

Key Latin American stock indexes and currencies:

Latin American market prices from

Reuters

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1093.29 -0.78

MSCI LatAm 2484.10 -0.79

Brazil Bovespa 127594.40 -0.12

Mexico IPC 56828.45 -1.09

Chile IPSA 6710.41 0.77

Argentina MerVal 1575503.39 2.604

Colombia COLCAP 1440.33 -0.09

Currencies Latest Daily %

change

Brazil real 5.1145 -0.20

Mexico peso 16.6321 -0.47

Chile peso 887.2 0.00

Colombia peso 3815.6 0.07

Peru sol 3.7204 0.30

Argentina peso 889.0000 0.00

(interbank)

Argentina peso 1210 -2.48

(parallel)