EMERGING MARKETS-Latam stocks drop on U.S. debt concerns

Reuters

* Brazil shares drop 0.37 pct on thin volumes

* Telefonica Brasil decline after rating downgrade

* Mexico stocks down 0.77 pct

By Priscila Jordão and Silvio Cascione

SAO PAULO, Oct 7 (Reuters) - Latin American stocks declined

on Monday, tracking global markets down on renewed concerns over

stalled budget talks in the United States.

Brazil's benchmark stock index slipped 0.37 percent, near

its lowest in one month, as shares of Brazil's biggest mobile

carrier Telefonica Brasil SA dropped following a

rating downgrade. Mexico's IPC stock index fell 0.77

percent, while Chile's bourse edged 0.35 percent down.

Trading volumes remained low in the Brazilian bourse as

investors cautiously watched the standoff between Democrats and

Republicans over the U.S. debt ceiling.

U.S. House Speaker John Boehner vowed on Sunday not to raise

the debt ceiling without a "serious conversation" about what is

driving the debt, while Democrats said it was irresponsible and

reckless to raise the possibility of a U.S. default.

"There was a glimmer of hope for some progress in the

weekend. But that didn't happen, and as Boehner closed the doors

for now, markets are on a waiting mode," said Gustavo Mendonca,

an economist with Saga Capital in Rio de Janeiro.

Preferred shares of Telefonica Brasil dropped 1.95 percent

to 47.26 reais after Credit Suisse analysts lowered its rating

to "neutral" from "overweight" and cut the price target to 51

reais from 59 reais. The analysts cited prospects for weak

margins and profitability in the third quarter, which would

likely reduce upside in the stock.

Stocks of Mexico's cement maker Cemex SAB de CV

fell 1.34 percent to 14.72 pesos, while shares of

telecommunications firm Entel weighed on Chile's main

index by dropping 1.41 percent to 7921.200 pesos.

Latin America's key stock indexes at 1435 GMT:

Stock indexes daily % YTD %

Latest change change

MSCI LatAm 3,348.66 -0.4 -11.47

Brazil Bovespa 52,653.88 -0.37 -13.61

Mexico IPC 40,595.50 -0.77 -7.12

Chile IPSA 3,825.91 -0.35 -11.05

Chile IGPA 18,827.86 -0.26 -10.64

Argentina MerVal 4,912.11 1.16 72.10

Colombia IGBC 14,029.02 -0.12 -4.67

Peru IGRA 15,594.43 0.41 -24.41

Venezuela IBC 1,754,758.42 0.4 272.21

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