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EMERGING MARKETS-Brazil stocks up on gov't asset-sale plan

(Updates prices) SAO PAULO, Aug 24 (Reuters) - Brazilian stocks rose on Thursday after a government council announced a massive sale of state assets, fueling bets that the government will manage to rein in the growth of public debt and cut a widening budget gap. Brazil intends to sell stakes in some of the country'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. The announcement followed a surprise move on Tuesday to privatize state-controlled power utility Centrais Elétricas Brasileiras SA, which triggered a market-wide rally.

Brazil's benchmark Bovespa stock index rose about 1 percent to a new six-year high, with shares of Eletrobras , as the power utility is known, among the biggest gainers. Also helping fuel optimism was a decision by the lower house of Congress to approve the main text of a bill creating a new market-based lending benchmark for state development bank BNDES that would greatly reduce discretionary subsidies.

"Coupled with well-behaved inflation, this sets the stage for the central bank to cut interest rates even more," analysts at the Magliano brokerage wrote in a client note. The Mexican peso traded nearly flat, down about .2 percent, after Mexico and Canada dismissed U.S. President Donald Trump's threats to scrap NAFTA, which had wreaked havoc in local markets the day before, as a negotiating tactic. Yields paid on Mexican interest-rate futures rose after minutes from the central bank's last rate-setting meeting showed policymakers remained cautious with rising inflation, suggesting rate cuts may be farther off than expected. "The discussion among directors was biased toward the need to remain vigilant and ready to protect the integrity of the inflation targeting framework, rather than laying out the case for near-term rate cuts," Goldman Sachs' economists wrote in a report. Mexican inflation was higher than expected in the first half of August, keeping pressure on the central bank to maintain high borrowing costs.

Key Latin American stock indexes and currencies at 1938 GMT:

Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1082.53 0.64 24.74 MSCI LatAm 2886.84 0.95 22.18 Brazil Bovespa 71158.88 0.97 18.15 Mexico IPC 51456.80 0.34 12.74 Chile IPSA 5152.80 0.49 24.12 Chile IGPA 25725.99 0.44 24.08 Argentina MerVal 23366.89 0.45 38.12 Colombia IGBC 10892.63 -0.75 7.55 Venezuela IBC 199748.94 0.8 530.02 Currencies daily % YTD % change change

Latest

Brazil real 3.1447 -0.11 3.32 Mexico peso 17.7230 -0.22 17.05 Chile peso 637.6 0.40 5.19 Colombia peso 2960.05 0.67 1.40 Peru sol 3.237 0.00 5.47 Argentina peso (interbank) 17.1900 0.29 -7.65 Argentina peso (parallel) 18.21 0.49 -7.63

(Reporting by Bruno Federowski; Editing by Sandra Maler)