(Updates prices, adds analyst comment) By Sruthi Shankar June 14 (Reuters) - Latin American stocks fell nearly 2% on Friday, mirroring weakness on Wall Street, while the Brazilian real dropped as optimism around the proposed overhaul of the country's pension system faded. The real fell 1% to 3.89 per dollar after Brazil's Economy Minister Paulo Guedes expressed his disappointment with a congressional committee's report on pension reform, saying it made more changes to the government's original proposals than he had expected. The currency was on track to give back all of its gains from Thursday when the report was released. The report showed the overhaul would help generate savings of 913.4 billion reais ($237 billion) over the next decade. In addition, a central bank indicator showed economic activity unexpectedly fell in April, marking the longest stretch of declining activity since the last recession in 2016. "It's (Guedes' comments) making investors nervous and leading to some weakness in the real," said Alejo Czerwonko, emerging markets strategist at UBS Global Wealth Management. "This should be interpreted as a part of the ebbs and flows in the approval process and ultimately doesn't alter the baseline scenario that a reform will be approved this year." Broad gains for the dollar after encouraging U.S. retail sales data also knocked developing world currencies lower. Investors are squaring up for a U.S. central bank meeting next week where policymakers might hint when they plan to cut interest rates, the prospect of which has supported risky assets in the recent weeks. The Mexican peso gained 0.3%, still benefiting from the announcement of a deal between Mexico and the United States that averted tariffs on its goods. The Chilean, the Colombian and the Argentine pesos all weakened. Stocks in the region fell, tracking a weak session for Wall Street's main indexes after U.S. chipmaker Broadcom slashed sales forecasts due to the U.S.-China trade war and weak industrial output data out of China. The MSCI index of Latin American stocks was on track to post its biggest percentage drop in a month. Sao Paulo-traded stocks were down about 1% as major banks fell for a second day on expectations of higher taxes, while Mexico's main stock index slid nearly 1%. Key Latin American stock indexes and currencies at 1941 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1014.12 -0.78 MSCI LatAm 2743.89 -1.69 Brazil Bovespa 97813.86 -0.97 Mexico IPC 43024.66 -1.05 Chile IPSA 5043.61 -0.56 Argentina MerVal 40693.57 0.12 Colombia IGBC 12291.06 0.03 Currencies daily % change Latest Brazil real 3.8925 -0.99 Mexico peso 19.1417 0.24 Chile peso 699.8 -0.54 Colombia peso 3268.25 -0.04 Peru sol 3.346 -0.48 Argentina peso 43.9500 -1.32 (interbank) (Reporting by Sruthi Shankar in Bengaluru Editing by Susan Thomas)