SAO PAULO, Sept 6 (Reuters) - Brazil's stocks and currency rallied on Wednesday after Congress cleared two key fiscal bills, adding to investor optimism over President Michel Temer's ability to pass market-friendly reforms. Lawmakers late on Tuesday approved softened budget targets for 2017 and 2018, as well as a bill setting a market-based benchmark rate for state development bank BNDES that will greatly curb subsidies in years to come.
The measures are central to Temer's efforts to limit growth of public debt without implementing further tax hikes. Investors hope that will boost long-term growth in Brazil as the economy emerges from the deepest recession in a century. Hopes of increased lawmaker support for his platform had already grown earlier this week after the country's top prosecutor threatened to partially revoke a plea deal that had supported corruption charges against the center-right president.
The Brazilian real strengthened 0.4 percent on Wednesday as the cost of insuring against a Brazilian sovereign default hit a new two-year low. The country's benchmark stock index neared a record high. Also supporting demand for Brazilian shares was news that the Finance Ministry was analyzing the implications of relinquishing veto rights on certain strategic decisions in a few companies, the latest step to diminish the state's role in the economy. Shares of state-controlled power utility Centrais Elétricas Brasileiras SA, which the government plans to privatize, rose as much as 2.7 percent. Planemaker Embraer SA , which could be targeted by the measure, rose 3.6 percent, also lifted by a $1.1 billion firm order from SkyWest.
The Chilean peso closed 0.7 percent higher at an eight-week high, tracking a rally in prices of copper, a key export. The currency has strengthened sharply in recent weeks, but some traders believe the move may be overstretched.
Key Latin American stock indexes and currencies at 1730 GMT:
Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1084.92 0 25.82 MSCI LatAm 2949.01 1.43 24.22 Brazil Bovespa 73454.82 1.81 21.96 Mexico S&P/BVM IPC 50613.23 0.62 10.89 Chile IPSA 5097.85 -0.69 22.80 Chile IGPA 25498.36 -0.62 22.98 Argentina MerVal 24231.00 0.85 43.23 Colombia IGBC 11219.89 -0.13 10.78 Venezuela IBC 266926.16 -1.06 741.90 Currencies daily % YTD % change change
Brazil real 3.1059 0.41 4.61 Mexico peso 17.7985 0.54 16.55 Chile peso 618.2 0.74 8.49 Colombia peso 2912.4 0.48 3.06 Peru sol 3.236 0.03 5.50 Argentina peso (interbank) 17.2050 0.26 -7.73 Argentina peso (parallel) 17.91 0.45 -6.09
(Reporting by Bruno Federowski; Editing by Chizu Nomiyama)