June 2, 2020 / 3:11 PM / a month ago

EMERGING MARKETS-Mexico's peso surges 2%, Argentina extends debt deadline

    * Brazil's real up 2.8%, Colombian peso at 3-week high
    * Argentina extends debt restructuring deadline to June 12
    * Analysts see Mexican peso outperforming in near-term

    By Susan Mathew
    June 2 (Reuters) - Latin American currencies rallied on
Tuesday with Mexico's peso hitting 11-week highs as hopes of
recovery from a likely deep recession buoyed sentiment.
    Regional stocks surged, tracking a higher open on Wall
Street. Brazil's Bovespa index scaled 12-week highs,
while Mexican stocks hit three-week highs.

    Mexico's peso rose 2%, extending gains to an 11th
session in 12 against a weaker dollar. The peso has gained about
10% over the period with analysts expecting the currency to
outperform regional peers in the short term as it benefits from
global growth momentum as economies reopen.

    Given that monetary and fiscal measures have postponed
near-term funding distress, it is possible to position for a
recovery in emerging markets from March lows, said Goldman Sachs
analysts, pointing to the Mexican peso and the Bovespa as Latam
beneficiaries. 
    Rising oil prices lifted Colombia's peso to near
three-month highs, while Brazil's real led gains in
Latam, up 2.8%. Brazil's government launched a new emergency
credit line of 20 billion reais ($3.73 billion) to help small
and mid-sized companies.
    But, the economic outlook for Latam's largest economy
continued to be bleak, with the country's treasury department
expecting Brazil to end 2020 with debt at 94% of GDP unless the
government shows commitment to fiscal reforms. 
    An ongoing federal investigation into Brazilian President
Jair Bolsonaro added to woes. The speaker of Brazil's lower
house of Congress on Monday did not dismiss the possibility of
opening impeachment proceedings against Bolsonaro.
    Argentina, meanwhile, extended the deadline to restructure
its $65 billion sovereign debt to June 12 and said it may
sweeten its most recent offer to creditors. The country is
already in default after having missed an interest payment
extension on May 22.
    The government may improve its offer less than what
creditors expect, given the International Monetary Fund's
backing for its current deal, Citigroup analysts said. 
    "But this argument is unlikely to be very effective as the
IMF's debt sustainability assessment treats Argentina's
macroeconomic policies as exogenous, which is obviously not the
case," they said. 
    Concerns also stem from the widening gap between the
official and black market rate of the Argentine peso. The
currency is being held artificially high by strict currency
controls, even as fears over the economy and demand for dollars
drive unofficial rates to record lows.
    
    Key Latin American stock indexes and currencies at 1430 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     968.44     1.78
                                   
 MSCI LatAm               1894.62     4.02
                                   
 Brazil Bovespa          89996.63     1.55
                                   
 Mexico IPC              37618.38     1.72
                                   
 Chile IPSA               3772.83     2.36
                                   
 Argentina MerVal        41223.64    3.015
                                   
 Colombia COLCAP          1124.18     0.64
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.2350     2.79
                                   
 Mexico peso              21.5960     1.98
                                   
 Chile peso                 780.9     1.61
                                   
 Colombia peso             3649.6     1.66
                                   
 Peru sol                  3.4037     0.47
                                   
 Argentina peso           68.7000    -0.10
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru;)
  
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