Recession worries see Latam currencies mark bleak start to new quarter



* Chilean peso hits record low of 939.60 per dollar

* Mexican bonds to outperform Latam peers - BNY Mellon

* Peru's annual inflation hits highest since July 1997

* Latam stocks track Wall Street higher (Updates prices)

By Susan Mathew

July 1 (Reuters) - Latin American currencies fell sharply on Friday, with Brazil's real hitting its lowest level in almost five months and Chile's peso at a new record low, as worries that major economies will tip into recession sent investors to safe havens.

As major central banks prioritize inflation control, investors are starting to price in a hit to economic growth, and have started to favor safer assets like the dollar.

A surge in commodity prices due to sanctions on Russia was seen keeping assets of resource-rich Latin America buoyant. But with the recent slide in their prices combined with some regional political tensions, Latam assets have taken a beating.

Mexico's peso MXN= dropped 0.7% after having marked meager second quarter losses compared to other developing market currencies.

"We believe (Mexican bonds) will likely outperform in the region (in the second half of the year) because the ruling Morena party may have reached a stalemate in congress on energy reforms," said Daniel Tenengauzer, head of markets strategy at BNY Mellon, referring to a plan to tighten state control of the electricity market.

Brazil's real BRBY slid 1.4% with eyes on a stimulus package that could see the government breach its revised spending cap as President Jair Bolsonaro seeks to regain support ahead of elections in October.

The package, which includes cash payments to truck drivers, saw a 2.5 billion reais addition in benefits for taxi drivers on Friday. The Senate approved the package on Thursday and it now awaits approval from the Lower House, which is seen green-lighting the plan.

As copper and oil prices tumbled, exporter of the respective items, Chile and Colombia, saw their currencies lose 1.7% and 1.3% on Friday, with Chile's peso at a never been hit 939.60 per dollar.

Chilean Finance Minister Mario Marcel on Friday introduced a tax reform bill that increases copper mining royalties on companies that produce more than 50,000 tonnes a year and raises taxes on high-income earners to fund the government's proposed social programs and reforms.

Data on Friday showed Peru's annual inflation rate hit its highest level in a quarter of a century in June. Peru's central bank has raised the key interest rate 525 basis points since mid-2021 in a bid to tame inflation, which it expects to begin declining in July.

As Wall Street bounced, Latam stocks rose between 0.5% and 1.4%, marking a positive start to the second half of the year.

Key Latin American stock indexes and currencies at 1854 GMT: Stock indexes

Latest

Daily %

change MSCI Emerging Markets

993.19

-0.75 .MSCIEF

MSCI LatAm

2033.19

-0.39 .MILA00000PUS

Brazil Bovespa

99044.06

0.51 .BVSP

Mexico IPC

47794.75

0.57 .MXX

Chile IPSA

4992.15

0.84 .SPIPSA

Argentina MerVal

89666.78

1.376 .MERV

Colombia COLCAP

1329.11

0.47 .COLCAP

Currencies

Latest

Daily %

change Brazil real

5.3032

-1.37 BRBY

Mexico peso

20.2350

-0.72 MXN=D2

Chile peso

929.9

-1.47 CLP=CL

Colombia peso COP=

4195.65

-1.28 Peru sol

3.8327

-0.48 PEN=PE

Argentina peso

125.4500

-0.18 (interbank) ARS=RASL


Reporting by Susan Mathew in Bengaluru; Editing by Alison Williams and Sandra Maler

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