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EMERGING MARKETS-Mexico peso down on NAFTA jitters; Chilean equities sink

(Recasts with peso losses) By Sheky Espejo MEXICO CITY, Feb 26 (Reuters) - Mexico's peso sank on Monday, hurt by worries over the future of the country's free trade deal with the United States, while Chilean equities fell on losses in a lithium miner and the forestry sector.

The Mexican peso shed 0.8 percent as renewed signs of tension between Mexico and U.S. President Donald Trump over his planned border wall cast a pall over the seventh round of talks on how to overhaul the NAFTA trade deal.

James Salazar, an analyst at CI Banco, said nervousness about the talks was hitting the peso. "It is part of this uncertain scenario that is caused by this round of the NAFTA renegotiations," he said.

Chile's blue-chip IPSA index led losses among Latin American stocks, falling 1.3 percent Shares in Sociedad Quimica y Minera de Chile SA (SQM) , which has attracted investor interest due to increasing demand for lithium from electric car makers, fell nearly 3 percent after analysts at Morgan Stanley cut their rating on the stock to "underweight" from "equal weight." Shares in Sociedad de Inversiones Oro Blanco SA, an investment vehicle with an indirect stake in SQM, shed 5.5 percent.

In the Morgan Stanley note, analysts said they expect prices for lithium to peak in 2018, before falling 45 percent by 2021, as demand growth falls far short of what is needed to absorb increasing supply.

Stocks in Chile's forestry sector also fell. Shares of forestry firm Empresas CMPC SA and Empresas Copec SA , which operates in forestry through subsidiary Arauco, both slid, on what traders said was profit-taking in the sector.

Key Latin American stock indexes and currencies at 2300 GMT: Stock indexes daily YTD % % chang Latest chang e e MSCI Emerging Markets 1221.08 0.38 5.41 MSCI LatAm 3161.04 -0.03 11.77 Brazil Bovespa 87652.64 0.41 14.73 Mexico IPC 48463.44 -0.37 -1.81 Chile IPSA 5669.86 -1.27 1.89 Chile IGPA 28436.54 -1.21 1.63 Argentina MerVal 32918.20 0.54 9.49 Colombia IGBC 11843.96 -0.47 4.16 Venezuela IBC 4912.01 -5.1 288.8 7 Currencies daily YTD % % chang chang e Latest e Brazil real 3.2319 0.27 2.52 Mexico peso 18.6880 -0.79 5.40 Chile peso 587.45 0.66 4.63 Colombia peso 2836.16 0.18 5.14 Peru sol 3.248 0.06 -0.34 Argentina peso (interbank) 20.1700 -0.94 -7.78 Argentina peso (parallel) 20.32 -1.08 -5.36 (Additional reporting by Felipe Iturrieta in Santiago; Editing by Leslie Adler)