EMERGING MARKETS-Mexican peso up, cenbank cuts rates; Brazil's real struggles

* Mexican cbank cuts rates by 50 bps to 5% * More cuts in the offing - analyst * Brazil's real swings in volatile trade; last down 0.2% * Brazil's new sanitization bill could lure investors (Updates after Mexican central banks decision) By Susan Mathew June 25 (Reuters) - Mexico's peso rose half a percent on Thursday after the central bank cut the country's key interest rate by 50 basis points, as widely expected, to help the economy as it faces a deep recession due to the coronavirus pandemic. The peso shed some gains right after the decision but then scaled session highs. The bank slashed rates to 5% in a unanimous decision by its five board members, citing risks to growth and stable inflation in the short term. "The outlook component of the statement remains relatively unchanged, which gives us confidence in maintaining our current policy rate forecast of two further 50bp cuts, followed by two 25bp cuts, that will bring the policy rate to 3.50% by end of year," said Sacha Tihanyi, deputy head of emerging market strategy at TD Securities. Chile's peso tracked copper, its largest export item, higher, while Colombia's currency was flat against a stronger dollar. Brazil's real last traded 0.2% lower in high volatility. The central bank chief said Brazil's GDP outlook is brighter than the newly reduced forecast of a 6.4% contraction this year, adding that the bank has not abandoned its inflation goals. The estimate compares to the International Monetary Fund's 9.1% contraction for the country expected this year. Meanwhile, Brazil approved a new sanitation bill in a move that is expected to prompt states and municipalities to privatize water and sewage companies, luring investors. Sao Paulo listed stocks rose 1.6% with industrial stocks among the biggest gainers. MSCI's index for Latin American stocks was flat with other regional benchmarks trading mixed. The index has fallen about 32% this year with the region emerging as the latest coronavirus epicenter. Researchers said the death toll from COVID-19 in Latam is expected to rocket to 388,300 by October, with Brazil and Mexico seen accounting for two-thirds of fatalities. The IMF warned on Thursday that stocks and other risky assets could suffer a second swoon if the coronavirus spreads more widely, lockdowns are reimposed or trade tensions surge again. In Argentina, Economy Minister Martin Guzman said the country is working with its creditors to reach a debt restructuring deal after talks stalled, though there is still distance to cover in economic and legal terms. Key Latin American stock indexes and currencies at 1939 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1005.02 -0.57 MSCI LatAm 1928.68 0.06 Brazil Bovespa 95857.37 1.57 Mexico IPC 37766.39 -0.37 Chile IPSA 4045.59 0.23 Argentina MerVal 41546.19 2.747 Colombia COLCAP 1123.48 -0.18 Currencies Latest Daily % change Brazil real 5.3310 -0.15 Mexico peso 22.6710 0.47 Chile peso 811.6 0.84 Colombia peso 3730.37 -0.09 Peru sol 3.5028 0.14 Argentina peso 70.1500 -0.07 (interbank) (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Dan Grebler and Marguerita Choy)