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EMERGING MARKETS-Latam FX weaken; Argentine peso at record low

Susan Mathew

* Argentina extends $65 bln debt deadline to May 22 * Brazil c.bank to shower economy with money in case of depression * Mexico's plans to reopen economy, cenbank meeting eyed * Emerging economies burn through $240 bln in reserves - BofA * Latam's second-largest carrier Avianca files for bankruptcy By Susan Mathew May 11 (Reuters) - Latin American currencies weakened on Monday, led by Brazil's real, while the Argentine peso dipped to new lows with negotiations over a $65 billion debt restructuring proposal extended as default risk loomed. Sentiment worldwide fizzled as some countries such as South Korea and China reported a second wave of the COVID-19 disease, while the number of new cases in parts of the emerging world such as Brazil, Russia and Mexico still remained worryingly high. Investors fear that this would force economies back into lockdown, intensifying economic damage and delaying a recovery in global growth. The Argentine peso slid as the deadline for the debt restructuring got extended to May 22 after an initial cut-off passed on Friday without the support needed for a comprehensive deal. This means the offer will expire the same day Argentina could trigger default over a $500 million interest payment. Brazil's real, one of the worst performing currencies this year in the emerging markets, fell around 1% staying near record lows. The country's Economy Minister Paulo Guedes on Saturday said the central bank is likely to shower the economy with money in case of a depression due to the pandemic. Consensus is rising that Latam's largest economy will shrink by more than 4% this year, with interest rates and inflation forecasts also being revised down to all-time lows. But Goldman Sachs strategists note that Latin America shows the most value in emerging markets, given its dependence on commodity prices - an area they expect to perform stronger in the second half of the year. Leading emerging countries, including China, Hong Kong, Brazil and Turkey, have burned through $240 billion in foreign exchange reserves over the past two months, Bank of America said on Monday, as central banks look to prop up their currencies and economies in the face of COVID-19. Mexico's peso lost 0.7% with investors awaiting the government's plans to reopen the economy this week from the pandemic-induced lockdown. President Andres Manuel Lopez Obrador expects to make an announcement by mid-week. On Thursday, all eyes will be on the central bank's rate meeting. Analysts at Monex Europe expect the bank to cut by another 50 basis points, followed by 100 basis points in subsequent meetings. But, "the remarkably high uncertainty in inflation outlook and the lower effectiveness of monetary policy in isolation amid a notably shy fiscal policy response... leads us to believe that.. (the) moves will be mainly aimed at reinforcing market stability and reducing financial distortions," writes Monex's FX market analyst Olivia Alvarez Mendez. Among stocks, notable moves were in Brazilian meat processor BRF SA which rallied after narrowing its quarterly loss, while reinsurer IRB slumped on being probed on liquidity issues. With airlines worldwide being among worst hit sectors by the pandemic, Latin America's second-largest carrier Avianca , filed for bankruptcy on Sunday, after failing to meet a bond payment deadline. Key Latin American stock indexes and currencies at 1434 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 915.51 0.42 MSCI LatAm 1601.77 -1.37 Brazil Bovespa 80004.06 -0.32 Mexico IPC 37384.11 -0.64 Chile IPSA 3849.23 0.81 Argentina MerVal 35501.95 -1.885 Colombia COLCAP 1104.82 -0.49 Currencies Latest Daily % change Brazil real 5.8110 -1.25 Mexico peso 23.8930 -1.14 Chile peso 827.5 -0.12 Colombia peso 3904.47 -0.40 Peru sol 3.4117 -0.14 Argentina peso 67.3600 -0.12 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing Alistair Bell)