(Updates prices) By Sagarika Jaisinghani and Susan Mathew Sept 29 (Reuters) - Brazil's real gave up gains and stocks in Sao Paulo hit three months lows on Tuesday after a new fiscal aid in the country package raised worries of the government overshooting the spending limit. The real fell 0.1% as President Jair Bolsonaro defended the a new minimum income program called Renda Cidada, which translates as "Citizen Income". Analysts at XP Investimentos say the new program lacks details on prioritizing expenses. Brazil's real has fallen to record lows this year and is among the worst performing emerging market currencies, with the biggest concern being the economy's fiscal standing. Latest data showed the government posted a primary budget deficit of 96.1 billion reais ($17 billion) in August as emergency spending continued. The Bovespa stock index fell 1% on financials' drag. Mexico's peso was flat against a weaker dollar before the first U.S. presidential debate due on Tuesday between U.S. President Donald Trump and Democratic challenger Joe Biden. "As we get closer to the U.S. elections, volatility will likely spike up as market participants reduce risk exposure in what might be a more contested race than currently priced in," said Claudio Irigoyen, Latam fixed income and currency economist at BofA Securities. "We forecast the Latam GDP to decline 8.1% in 2020 and then increase 3.6% in 2021." The Colombian peso declined and stocks there hit an over 5-week low after President Ivan Duque said Colombia will extend a so-called selective quarantine for the duration of October. In line with weakness on Wall Street, most other Latam stocks fell, with those in Mexico and Chile declining for the first time in four days. But local demand for equities in Brazil remains strong, BofA's Irigoyen said, adding that e-commerce, proteins and defensive plays in Mexico would be BofA's picks. A basket of Latin American equities tumbled 1.2% in its second consecutive day of losses. The index is also set for its biggest monthly percentage decline since the coronavirus-driven crash in March. U.S. private equity firm Advent International said on Tuesday it had raised a $2-billion fund to invest in Latin American companies, hoping to target assets made cheaper by depreciation in local currencies. In Argentina, the peso was flat. Argentina will make interest payment due on dollar and euro-denominated "Par" bonds on Wednesday this week, the country's Economy Ministry said in a statement on Monday, closing off an unresolved issue from its recent major debt revamp. Key Latin American stock indexes and currencies at 1914 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1069.43 -0.04 MSCI LatAm 1804.04 -1.12 Brazil Bovespa 93766.47 -0.95 Mexico IPC 37156.38 -0.2 Chile IPSA 3555.30 -1.12 Argentina MerVal 41688.37 -0.926 Colombia COLCAP 1166.28 -0.88 Currencies Latest Daily % change Brazil real 5.6399 -0.10 Mexico peso 22.4081 -0.06 Chile peso 783.8 0.08 Colombia peso 3885.2 -0.36 Peru sol 3.5977 -0.25 Argentina peso 76.1100 -0.07 (interbank) (Reporting by Sagarika Jaisinghani in Bengaluru; additional reporting by Luana Maria Benedito in Sao Paulo, Aaron Saldanha in Gurugram and Divya Chowdhury in Mumbai Editing by Alistair Bell and Nick Zieminski)
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