EMERGING MARKETS-Latam stocks weaken on merger news, holidays

* Bovespa falls more than 1 pct, Mexico's IPC down 0.06 pct

* Volumes seen thin ahead of Christmas, New Year holidays

* Argentina's MerVal closes at record highs

* Peru suspends integration with Colombia, Chile indexes

By Manuela Badawy and Luciana Lopez

NEW YORK/SAO PAULO, Dec 20 (Reuters) - Latin American equities were mostly weaker in choppy trade on Monday as merger news in Brazil and thin volumes in the region during a holiday-shortened week kept investors from taking large positions ahead of year-end.

The MSCI Latin American stocks index .MILA00000PUS dropped 0.52 percent after making modest gains in the previous week.

In Argentina, the benchmark MerVal stock index .MERV touched record highs. Meanwhile, news that Peru's Congress did not approve of the country's equity linkage with Colombia and Chile pressured the Bogota stock market.

Brazil's benchmark Bovespa stock index .BVSP saw choppy trading, falling 1.06 percent, dipping slightly into the red for the year on merger news of local companies and a drop in steel stocks. Mexico's IPC stock index .MXX edged 0.06 percent lower after touching an all-time high in the previous session.

"We haven't seen any news that would give a bounce to the market. For all the profits in the past two or three months, I feel like there's some profit-taking," said Carlos Alonso, head of trading at stock brokerage Interacciones in Mexico.

Shares of Hypermarcas (HYPE3.SA), the largest Brazilian maker of non-discretionary consumer goods, plunged 6.29 percent after the company agreed late on Sunday to buy rival Mantecorp for 2.5 billion reais ($1.5 billion) in cash and stock. For details, see [ID:nN20180595]

Meat producer JBS (JBSS3.SA) fell 1.29 percent. Food and beverage company Sara Lee Corp (SLE.N) has been in talks to sell itself to the Brazilian company. [ID:nN19146410]

Raia SA, Brazil's third-biggest drugstore chain by number of shops, jumped 6.58 percent. The company and its shareholders raised 654.7 million reais last week in an initial public offering. [ID:nN16198693] The stock is not part of the Bovespa index.

Argentina's MerVal .MERV stock index closed at record highs rising 1.82 percent to 3,465.31 points on year-end portfolio repositioning.

Banking and commodity shares pushed the index higher, with financial firm Grupo Galicia (GFG.BA) rising 5 percent and steel company Tenaris (TENA.BA) (TS.N) gaining 2.5 percent.

News that the Peruvian government had suspended the planned integration of its stock market with those in Colombia and Chile put a damper on Colombia's IGBC .IGBC stock index falling 0.46 percent.

"There were inflated expectations and with one less participant it creates a climate of mistrust with what can happen with Chile," said said David Aldana, head of economic research at brokerage firm Ultrabursatiles in Colombia.

"Plus, the market that would have benefited the most would have been Colombia."

Peru's IGRA index .IGRA gained 0.26 percent, supported by a rise in mining shares with copper miner Southern Copper (SPC.LM) up 1.48 percent and precious metals firm Buenaventura (BVN.LM) rising 1.25 percent. The index has gained 55.9 percent so far this year.

World copper prices climbed back toward record highs after renewed supply threats in top producer Chile provided an additional underpinning to the red metal's demand-driven rally this year.

Chile's IPSA stock index .IPSA fell 0.27 percent pressured by a drop in financial and construction shares.