EMERGING MARKETS-Latam stocks fall; Petrobras dents Bovespa

Thu Jan 16, 2014 4:56pm EST

* Mexico's IPC slides, led by America Movil

* Brazil interest rate hike adds to Bovespa losses

MEXICO CITY Jan 16 (Reuters) - Most Latin American stock indexes fell on Thursday, led by Brazil's benchmark index, which tumbled on concern higher U.S. and Brazilian interest rates will choke growth and fuel-sales losses will crimp profit at state-run oil giant Petrobras.

The Bovespa index, which tracks the most-traded stocks on the Sao Paulo stock exchange, reversed early gains to fall 0.82 percent. Mexico's IPC index fell 0.8 percent.

Petroleo Brasileiro SA, as Petrobras is formally known, led the Bovespa lower, with its preferred shares, the company's most-traded class of stock, falling 2.12 percent and common shares shedding 2.81 percent.

Late on Wednesday, the Brazilian government said it was not considering an increase in gasoline and diesel fuel prices in June, denying a report in the Folha de S. Paulo newspaper.

Petrobras' refining division has lost more than $12 billion in two years because of the government's fuel-pricing policy. This policy keeps domestic prices below world prices, forcing Petrobras to sell rising fuel imports at a loss. Local diesel prices are about 20 percent below world prices.

The half-percentage-point increase in Brazil's benchmark interest rates by the central bank late Wednesday also helped drive stocks lower. The larger-than-expected increase could slow an already sluggish economy.

In Mexico, telecoms giant America Movil, controlled by billionaire Carlos Slim, led the index lower, falling 0.88 percent.

Slim has upped his company and family stakes in Telekom Austria, giving himself enough of the pie to veto big decisions at the Austrian firm but less than the 30-percent mandatory takeover offer threshold.

Additionally, a judge has ordered Slim's fixed-line phone company Telmex to stop divesting assets, which rivals and analysts believe is part of a strategy that could allow him to circumvent regulation.

Chile's IPSA index rose 0.63 percent to close on 3,673 points, thanks to 1.48 percent gain in bank Banco de Chile .

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