(Recasts with peso reversing losses) MEXICO CITY, Aug 23 (Reuters) - The Mexican peso shook off early losses on Wednesday as the market doubted U.S. President Donald Trump would make good on threats to pull out of the North American Free Trade Agreement (NAFTA). At a campaign-style rally in Arizona late on Tuesday, Trump in a speech that played to his conservative base of support warned he might terminate the NAFTA pact with Mexico and Canada if three-way talks failed to bridge deep differences. Top officials in both Mexico and Canada dismissed Trump's threat as a negotiating tactic. The Mexican peso depreciated 1 percent early in the session, but it retraced those losses to trade near flat. "The irrational comments of (Trump) again raised doubts about the stability of his administration, which has been losing credibility in the face of financial markets," said Gabriela Siller, analyst at Banco BASE. Mexico's peso has been the best performing currency this year, up more than 17 percent, as it rocketed back from a record low in January on bets Trump will not scrap NAFTA. The first round of trade talks ended on Sunday with little sign of any breakthrough coming. Brazil's benchmark Bovespa stock index rose about 0.6 percent to close at its highest since January 2011 as the government announced a raft of privatizations. The Brazilian real strengthened more than 1 percent. A government council approved a massive sale of state assets including stakes in some of Brazil's busiest airports as well as oil exploration, highway and power dam licensing rights, as President Michel Temer seeks to reduce state involvement in the economy and cut a widening budget gap. Still, shares of Centrais Elétricas Brasileiras SA fell 11 percent as traders booked profits from a 50 percent jump on Tuesday. A government proposal to privatize Eletrobras, as the power utility is known, fueled hopes of lower debts and higher efficiency at the firm.
Latin American stock indexes and currencies at 20:34 GMT:
Stock indexes Latest Daily YTD pct pct change
MSCI Emerging Markets 1,075.60 +0.29 +24.74 MSCI LatAm 2,859.69 +0.10 +22.18 Brazil Bovespa 70,477.63 +0.67 +17.02 Mexico S&P/BVM IPC 51,280.17 -0.10 +12.35 Chile IPSA 5,127.93 +0.26 +23.52 Chile IGPA 25,613.97 +0.19 +23.54 Argentina MerVal 23,256.86 +1.56 +37.47 Colombia IGBC 10,974.98 +0.15 +8.36 Venezuela IBC 198,170.53 +0.07 +525.04 Currencies daily % YTD % change change
Brazil real 3.1411 1.019 +3.44 Mexico peso 17.665 0.01 +17.43 Chile peso 640.180 +0.09 +4.77 Colombia peso 2,980.000 +0.13 +0.72 Peru sol 3.237 +0.03 +5.47 Argentina peso (interbank) 17.220 -0.03 -7.81 Argentina peso (parallel) 18.250 +0.38 -7.84
(Reporting by Michael O'Boyle;Editing by Cynthia Osterman)