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EMERGING MARKETS-Brazil leads Latam rally; Argentina extends debt deadline

Susan Mathew and Ambar Warrick

* Brazil's real at over 6-week high * Mexican, Colombian pesos buoyed by strong oil prices * Argentina extends debt restructuring deadline to June 12 * Analysts see Mexican peso outperforming in near-term (Adds details, updates prices) By Susan Mathew and Ambar Warrick June 2 (Reuters) - Latin American currencies rallied on Tuesday with Brazil's real and stocks leading gains as hopes for a recovery from a deep recession buoyed sentiment. Brazil's Bovespa index scaled 12-week highs, while the real jumped more than 3% to the dollar as the country's government launched a new emergency credit line of 20 billion reais ($3.73 billion) to help small and mid-size companies. While easing coronavirus lockdowns, and no immediate fallout from escalating U.S.-China tensions, have helped Latin American assets recoup some of their losses this year, there are still concerns over the full extent of the COVID-19 pandemic. The economic outlook for Latam's largest economy remains 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 has 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. Mexico's peso rose 2%, touching an 11-week high against a weaker dollar. The peso has gained about 10% over past 12 sessions with analysts expecting the currency to outperform regional peers in the short term. 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 also helped the Mexican peso, while crude exporter Colombia saw its peso come near three-month highs. Argentina, meanwhile, extended the deadline to restructure $65 billion in 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 terms, 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." 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: Stock indexes Latest Daily % change MSCI Emerging Markets 967.19 1.65 MSCI LatAm 1889.43 3.74 Brazil Bovespa 90390.25 2 Mexico IPC 37426.52 1.21 Chile IPSA 3748.69 1.71 Argentina MerVal 41424.63 3.518 Colombia COLCAP 1115.74 -0.11 Currencies Latest Daily % change Brazil real 5.2187 3.12 Mexico peso 21.7808 1.12 Chile peso 780.2 1.70 Colombia peso 3635.26 2.06 Peru sol 3.3947 0.74 Argentina peso 68.7100 -0.12 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Tom Brown)