EMERGING MARKETS-Brazil drags LatAm stocks down on 'cliff' fears
* U.S. lawmakers return to budget discussions
* Petrobras weighs on Brazil's Bovespa
* Bovespa falls 0.89 pct, Mexico's IPC flat
SAO PAULO, Dec 27 (Reuters) - Brazil's Bovespa stock index fell on Thursday as investors remained cautious over U.S. budget negotiations, while low holiday trading volumes contributed to volatility. State-controlled oil company Petrobras weighed on Brazil's benchmark Bovespa index, while gains for Mexican financial companies failed to significantly lift the IPC , which ended the day flat. Risk appetite was limited as U.S. President Barack Obama returned to Washington on Thursday morning to try to revive negotiations to avert the "fiscal cliff" of automatic tax hikes and spending cuts that could throw the U.S. economy into recession. Concerns among traders mounted later on Thursday after U.S. Senate Majority Leader Harry Reid said, in a speech on the Senate floor, that the U.S. economy is poised to go over the cliff. "The market is still undefined due to the United States, so many investors are choosing to be a bit more defensive in the last sessions of the year," said Joao Pedro Brugger, an analyst with Leme Investimentos in Florianopolis, Brazil. Brugger said low trading volume due to year-end holidays contributed to greater-than-usual volatility. Brazil's Bovespa whipsawed throughout the day before ending down 0.89 percent at 60,415.95 points. Shares of oil giant Petroleo Brasileiro SA, known as Petrobras, slipped 3.24 percent and ranked as the biggest contributor to the index's losses. Brugger said investors' jitters over the company's future revenue stream are preventing the stock from advancing further, despite government pledges to increase fuel prices next year. Mexico's IPC index dipped 0.06 percent to 43,469.89. Lender Grupo Financiero Banorte rose 0.4 percent, while shares of conglomerate Alfa added 0.81 percent, driving gains. Chile's bourse fell slightly, losing 0.15 percent to 4,294.50.
Latin America's key stock indexes at 1532 GMT:
Stock indexes % change
MSCI LatAm 3,782.91 -0.23Brazil Bovespa 60,415.95 -0.89Mexico IPC 43,469.89 -0.06Chile IPSA 4,294.50 -0.15Chile IGPA 21,027.51 -0.06Argentina MerVal 2,839.14 0.39Colombia IGBC 14,709.30 0.83Peru IGRA 20,377.63 0.11Venezuela IBC 467,732.75 0.5