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EMERGING MARKETS-Brazil stocks extend losses as Petrobras tumbles

* Brazil Bovespa falls 1.54 pct, Mexico IPC down 0.44 pct

By Asher Levine

SAO PAULO, Nov 26 (Reuters) - Brazilian stocks dropped on

Tuesday as shares of state-run oil firm Petrobras sank on

concerns the government would delay approval of a new pricing

policy that could stem losses in the company's refining


Mexico's IPC index added to Monday's losses, while

Chile's bourse fell for the fifth session in six.

Brazil's benchmark Bovespa stock index fell for the

fourth session in five, losing 1.54 percent to 51,459.75, a

level it has not closed below since Aug. 30.

Preferred shares of Petroleo Brasileiro SA, as

Petrobras is formally known, tumbled 4.3 percent, their biggest

daily loss in almost five months, after Finance Minister Guido

Mantega said the government must carefully analyze a potential

fuel price policy that would automatically raise gasoline prices

along with inflation.

The company has been forced to import fuel and sell gasoline

at a loss due to prices that are kept below global market rates

in order to help keep inflation in check.

"People were expecting something to happen on (the pricing

formula) this year," said Ariovaldo Santos, a trader with

H.Commcor in Sao Paulo. "Mantega came out saying it can't be

inflationary or add to indexation of the economy, so now there's

an expectation that perhaps nothing will come of it."

Petrobras is the heaviest-weighted component of the Bovespa


Banking shares helped support the Bovespa, however, as an

index of financial stocks snapped a four-session slump.

Bank shares had suffered in recent sessions on concern over

an impending Supreme Court ruling in a long-standing lawsuit

involving the country's biggest lenders.

The lenders have been accused of failing to remunerate

account holders properly during the inflation-fighting monetary

plans implemented during the late 1980s and early 1990s. The

sector could be forced to pay as much as 150 billion reais

($65.2 billion) in compensation.

"All the banks improved today because it looks less likely

that a decision will come out this year," added Santos, citing

heavy lobbying from government officials aiming to delay the

ruling due to the deleterious effects it could have on Brazil's

economic growth.

Mexico's IPC index fell for the second straight session,

losing 0.44 percent to 40,766.32.

Bottling firm Femsa dropped 1.5 percent, while

mining firm Grupo Mexico slipped 0.85 percent.

Chile's IPSA index lost 0.76 percent to 3,689.63, a level it

has not closed below since early September.

Retailer Falabella fell 1.8 percent, while rival

Cencosud lost 2.05 percent.

Latin America's key stock indexes at 1540 GMT:

Stock indexes daily % YTD % change

Latest change

MSCI LatAm 3,237.99 -1.31 -13.61

Brazil Bovespa 51,459.75 -1.54 -15.57

Mexico IPC 40,766.32 -0.44 -6.73

Chile IPSA 3,689.63 -0.76 -14.22

Chile IGPA 18,268.86 -0.37 -13.30

Argentina MerVal 5,757.20 4.11 101.70

Colombia IGBC 13,161.24 -0.49 -10.56

Peru IGRA 15,015.14 -0.12 -27.21

Venezuela IBC 2,467,876.18 -0.79 423.48