Colombian peso heads for worst week in three years on fiscal fears

Brazil's Bovespa .BVSP dropped 0.2%, on track to snap a seven-session winning streak, while the real BRL= weakened 0.9%. Fiscal worries remain in focus as President Luiz Inacio Lula da Silva said late on Thursday that Brazil's rising public debt would not concern him in a potential new term. Lula, who is seeking reelection in October, blamed part of the increase on the country's 14% benchmark interest rate. Brazil's gross debt has risen more than 10 percentage points since Lula took office, reaching 81.9% of GDP in June, central bank data showed. > "The challenge is that Brazil's fiscal situation may need to deteriorate further before policymakers are forced to address it," said Alejo Czerwonko, chief investment officer for emerging markets at UBS Global Wealth Management. In Chile, unemployment rate reached 9.5% in the quarter through July, slightly above the 9.4% forecast in a Reuters poll. Separately, Peru's economy is expected to grow 3.4% in this year and the next, data showed on Friday, while Mexico raised $1.8 billion in its first Samurai bond sale in two years. The Colombian peso headed for its worst week in nearly three years on Friday after a much weaker-than-expected fiscal outlook, while broader Latin American assets also weakened after Federal Reserve Chair Kevin Warsh's remarks lifted rate-hike bets. Colombia's peso COP= slipped 1.5%, and was on track for its biggest weekly loss since October 2023, down more than 5%, after the government's budget bill revealed a fiscal outlook far worse than markets had anticipated. Analysts warned it may need support from multilateral lenders, including the International Monetary Fund (IMF). Recently elected President Abelardo De La Espriella's administration, tasked with rebuilding the economy after a recent earthquake, proposed a 2027 budget of 639.4 trillion pesos ($203.6 billion), above the previous government's estimate of 575.7 trillion pesos. Goldman Sachs said the wider deficits reflected a more realistic picture of Colombia's fiscal position rather than a retreat from fiscal discipline, though it remained cautious on the medium-term outlook. > "While the magnitude of the upgraded deficits surprised relative to the administration's earlier guidance for a leaner budget, we do not read them as evidence of diminished resolve for fiscal restraint," said analysts from Goldman Sachs in a note. MSCI's Latin American equities index .MILA00000PUS fell 1.2%, while its regional currency index .MILA00000CUS slipped 0.7%. Both benchmarks were heading for weekly losses. Markets also digested Warsh's Jackson Hole remarks, in which he reiterated his focus on bringing inflation back to the central bank's 2% target, while offering little guidance on future policy moves. Traders subsequently added to bets on a September rate hike by the U.S. central bank. The dollar =USD rose 0.6% to a two-week high, extending a recovery from sharp losses last week when U.S. Treasury bond-buyback plans revived talks of "dollar debasement" trades. | | | | | --- | --- | --- | | Stock indexes | Latest | Daily % change | | MSCI Emerging Markets .MSCIEF | 1718.13 | -0.27 | | MSCI LatAm .MILA00000PUS | 3020.64 | -1.17 | | Brazil Bovespa .BVSP | 174866.15 | -0.15 | | Mexico IPC .MXX | 65432.66 | -0.6 | | Chile IPSA .SPIPSA | 11440.26 | -0.27 | | Argentina MerVal .MERV | 2985283.34 | -0.53 | | Colombia COLCAP .COLCAP | 2480.76 | -0.36 | | | | | | --- | --- | --- | | Currencies | Latest | Daily % change | | Brazil real BRL= | 5.2065 | -0.87 | | Mexico peso MXN= | 17.038 | -0.39 | | Chile peso CLP= | 929.85 | -0.43 | | Colombia peso COP= | 3198.78 | -1.49 | | Peru sol PEN= | 3.3509 | -0.05 | | Argentina peso (interbank) ARS=RASL | 1,512.0 | 0.03 | | Argentina peso (parallel) ARSB= | 1,535.0 | 1.29 |

Colombian peso heads for worst week in three years on fiscal fears

Brazil, Chile, Peru and Mexico updates

Colombian peso weakens on fiscal outlook

Latin American assets fall after Warsh remarks

Key Latin American stock indexes and currencies

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Stock indexes	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	1718.13	-0.27
MSCI LatAm .MILA00000PUS	3020.64	-1.17
Brazil Bovespa .BVSP	174866.15	-0.15
Mexico IPC .MXX	65432.66	-0.6
Chile IPSA .SPIPSA	11440.26	-0.27
Argentina MerVal .MERV	2985283.34	-0.53
Colombia COLCAP .COLCAP	2480.76	-0.36


Currencies	Latest	Daily % change
Brazil real BRL=	5.2065	-0.87
Mexico peso MXN=	17.038	-0.39
Chile peso CLP=	929.85	-0.43
Colombia peso COP=	3198.78	-1.49
Peru sol PEN=	3.3509	-0.05
Argentina peso (interbank) ARS=RASL	1,512.0	0.03
Argentina peso (parallel) ARSB=	1,535.0	1.29