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EMERGING MARKETS-Brazil, Mexico stocks fall on U.S. debt deadlock

* Brazil benchmark Bovespa down 0.44, near one-month low

* Mexico IPC drops 0.75 as U.S. default concerns mount

By Priscila Jordão

SAO PAULO, Oct 8 (Reuters) - Brazilian and Mexican stocks

fell on Tuesday as stalled talks in Washington to avoid a U.S.

debt default weighed on global markets.

Brazil's benchmark stock index slipped 0.44 percent but good

news for a handful of companies held the index back from a

one-month low. Mexico's IPC stock index fell 0.75

percent, while Chile's bourse lost 0.11 percent.

A political standoff in Washington entered its second week

on Tuesday, as Republican congressional leaders insisted on

negotiations to cut the nation's fiscal deficit as a condition

for raising the federal debt limit.

The U.S. Treasury expects to exhaust all of its remaining

borrowing capacity under the current $16.7 trillion cap by Oct.


If the U.S. government defaults on debt because it lacks

further borrowing authority, the results could be "devastating"

for the world economy, Olivier Blanchard, the IMF's chief

economist, said on Tuesday.

On the Sao Paulo stock market, shares of Brazilian telecom

Grupo Oi SA rose 4.6 percent after the company

assured investors late on Monday that its merger with Portugal

Telecom SGPS SA would not dilute the Oi shareholders.

Wood pulp producers Fibria Celulose SA and Suzano

Papel e Celulose SA gained 2.8 percent and 2.0

percent respectively after Goldman Sachs Group analysts raised

their recommendation on the stocks from "neutral" to "buy".

In Mexico, mining and infrastructure company Grupo Mexico

and billionaire Carlos Slim's telecommunications

giant America Movil both lost over 1 percent, among

the biggest decliners on the IPC index.

Latin America's key stock indexes at 1448 GMT:

Stock indexes daily % YTD %

Latest change change

MSCI LatAm 3,338.56 -0.36 -11.77

Brazil Bovespa 52,184.26 -0.44 -14.38

Mexico IPC 40,146.80 -0.75 -8.14

Chile IPSA 3,808.70 -0.11 -11.45

Chile IGPA 18,765.03 -0.09 -10.94

Argentina MerVal 4,957.30 0.67 73.68

Colombia IGBC 14,143.16 0.51 11.66

Peru IGRA 15,551.31 0.13 -24.62

Venezuela IBC 1,757,781.35 0.19 272.86