* Fitch predicted to downgrade Colombia this year -GS * Chilean stocks surge on SQM gains * Eletrobras falls on bill to privatize firm (Adds comments, updates prices throughout) By Ambar Warrick and Shreyashi Sanyal May 20 (Reuters) - Colombia's peso and stocks tumbled on Thursday after the Andean country lost one of its three investment-grade ratings, while other Latin American currencies were mostly mixed amid growing concerns over tighter U.S. monetary policy. The peso shed 1%, touching a one-week low to the dollar after S&P Global Ratings lowered Colombia's rating to junk bond status. Analysts said the downgrade had come earlier than anticipated, while Wall Street banks JPMorgan, Morgan Stanley and Goldman Sachs predicted that Fitch would follow suit with a rating downgrade this year. The downgrade follows violent anti-government protests over a now-withdrawn tax proposal, as well as growing concerns over strained fiscal spending and debt because of the COVID-19 pandemic. "We do expect Fitch to follow S&P in the near future given our expectation that political restrictions will prevent the authorities from delivering a meaningful structural tax reform," Goldman Sachs analysts wrote in a note. "Furthermore, rising social activism may have negative implications for medium-term investment/growth and the fiscal baseline, given intense demands for additional spending." Colombia's Colcap index tumbled 1.9% to 1,242.52 points, to a two-week low. "The Colcap index should see strong support ahead of the 1,200 level," said Edward Moya, senior market analyst at OANDA. "Colombia is one of the countries leading the recovery in LATAM, so many investors might be looking to shortly jump back into the Colombia assets." Other Latin American currencies were mixed after minutes on Wednesday of the U.S. Federal Reserve's latest meeting showed more talk of tapering the central bank's bond purchase program than initially expected. Brazil's real rose 0.9%, recovering from its worst day in more than a week. The prospect of tighter monetary policy in the country has benefited the real, as inflation heats up in the country. Mexico's peso rose 0.2%, although further gains were hampered by a drop in oil prices. The Mexican economy is expected to benefit from a post-COVID recovery in the United States. Investors have also been watching for potential interest rate hikes by the Mexican central bank, given a recent spike in inflation. Chile's peso fell 0.6%, while Chilean stocks rose 0.5%. Broader Latam stocks edged higher, with the MSCI's index of regional stocks gaining 0.2%. Shares of Brazilian state power utility Eletrobras fell 2.7% from record highs, as the country's lower house approved a bill to privatize the firm. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1330.41 0.22 MSCI LatAm 2485.02 0.23 Brazil Bovespa 122462.24 -0.14 Mexico IPC 49690.17 0.62 Chile IPSA 4047.28 0.42 Argentina MerVal 56785.09 1.42 Colombia COLCAP 1242.04 -1.86 Currencies Latest Daily % change Brazil real 5.2709 0.85 Mexico peso 19.8768 0.20 Chile peso 719.4 -0.74 Colombia peso 3715.05 -0.85 Peru sol 3.71 0.81 Argentina peso (interbank) 94.2400 -0.03 Argentina peso (parallel) 152 2.63 (Reporting by Ambar Warrick and Shreyashi Sanyal in Bengaluru; Editing by Barbara Lewis and Will Dunham)
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