May 18, 2017 / 4:36 PM / in 8 months

EMERGING MARKETS-Brazil stocks, currency slump on reform fears; LatAm assets drop

    By Bruno Federowski
    SAO PAULO, May 18 (Reuters) - Brazilian equity and currency
markets plummeted on Thursday as fresh accusations against
President Michel Temer dampened the outlook for his structural
reform plans.
    Temer was caught on tape encouraging a prominent executive
to pay a monthly fee to keep jailed former House Speaker Eduardo
Cunha silent in the country's biggest-ever graft probe, sources
said on Wednesday, confirming a report in newspaper O Globo.
Temer denied reports that he had authorized such payments.

    Brazil's benchmark Bovespa stock index fell as much as 10.7
percent, triggering a temporary halt on trading. Shares of
blue-chips Petróleo Brasileiro SA, Banco Bradesco SA
 and Itaú Unibanco Holding SA subtracted
the most points from the index.
    The Brazilian real tumbled 7.5 percent to 3.38 to the
dollar, its weakest since December 2016, driving the central
bank to intervene in markets to cushion the currency's decline.
    "The real trading at 3.10 was predicated on successful
passage of pension reform and other structural reforms.  That is
no longer the base case," analysts at Brown Brothers Harriman
wrote in a note to clients.
    "As we've long complained, 3.10 was pricing in perfection.
Now, in this imperfect situation, the big question is where
should it trade now that this basic assumption of perfection has
been turned on its head?"
    Those concerns spilled over into other markets, with
Argentine's main Merval stock index slumping. Mexican
companies with exposure to Brazil, such as América Móvil
 and bottler Coca-Cola FEMSA, also tumbled.

    Bets that U.S. President Donald Trump could be forced out
from office following reports that he sought to interfere with a
federal investigation helped to drive all Latin American
currencies lower.
    Uncertainty over the implementation of his expanisionist
pledges have weighed on demand for riskier, emerging market
assets as investors scurried for the safety of U.S. bonds
    Key Latin American stock indexes and currencies at 1630 GMT:
 Stock indexes                           daily %   YTD %
                                          change  change
 MSCI Emerging Markets           988.68    -1.98   16.97
 MSCI LatAm                     2525.08    -6.97   15.97
 Brazil Bovespa                60999.62    -9.68    1.28
 Mexico IPC                    48369.89    -0.78    5.97
 Chile IPSA                     4782.15    -1.47   15.19
 Chile IGPA                    24030.78    -1.34   15.90
 Argentina MerVal              21025.01    -2.99   24.28
 Colombia IGBC                 10640.23    -0.76    5.06
 Venezuela IBC                 66184.95     1.24  108.75
 Currencies                              daily %   YTD %
                                          change  change
 Brazil real                     3.3868    -7.51   -4.06
 Mexico peso                    18.9200    -0.73    9.64
 Chile peso                       675.8    -0.78   -0.75
 Colombia peso                   2927.2    -1.03    2.54
 Peru sol                         3.284    -0.30    3.96
 Argentina peso (interbank)     16.0000    -2.44   -0.78
 Argentina peso (parallel)        16.12    -0.37    4.34
 (Reporting by Bruno Federowski)
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