EMERGING MARKETS-Latam FX down as dollar firms, El Salvador bitcoin

    * U.S.-Mexico economic talks in focus
    * Chile copper exports surge
    * Argentine stocks hit record high

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    Sept 7 (Reuters) - Latin American currencies weakened on
Tuesday, with Chile's peso leading loses as rising U.S. Treasury
yields sent the dollar rallying, while El Salvador became the
first country in the world to adopt bitcoin as legal tender.
    El Salvador's adoption of the cryptocurrency, which will
serve alongside the U.S. dollar, suffered teething problems when
the government had to unplug a digital wallet to cope with
demand.
    President Nayib Bukele said El Salvador holds 400 bitcoins.
He expects the move to be beneficial for the country and for
remittances, but polls show Salvadorans remain somewhat
skeptical considering its volatility. 
    Analysts fear the move may fuel money laundering and
financial instability. It has already muddied the outlook for
more than $1 billion in financing that El Salvador is seeking
from the International Monetary Fund.
    This comes as a mandate over the weekend allowed for the 
president to stand for re-election.
    "Market participants are likely to read this as another move
consolidating power around the executive, and one which is
likely to generate even more delays with the ongoing IMF
negotiations," strategists at Citi said in a note. 
    "We were skeptical on the recent rally in El Salvador
bonds... Uncertainty created by (re-election) news will weigh
negatively on bonds." 
    As the dollar made up for recent losses, Chile's peso
fell 1% to lead losses across the region as prices of its
biggest export, copper, retreated on concerns over Chinese
demand.
    Still, data showed Chilean copper exports soared 40.5% in
value in August from a year ago, as prices of the metal hit
record highs this year.
    Mexico's peso broke a seven-session winning streak,
down 0.1% ahead of its 2022 budget proposal expected to be
presented on Wednesday. 
    Focus is also on upcoming high-level economic talks between
Mexican and U.S. ministers this week. 
    "In the absence of a comprehensive fiscal reform proposal,
expenditure cuts and use of assets will likely be needed again,"
said Citi strategists. 
    "As has been the case, we anticipate a commitment to
conservative fiscal targets and focus on (President Andres
Manuel Lopez Obrador's) spending priorities." 
    Brazil markets were closed for a holiday. 
    Stocks in the region fell, in line with
world stock markets, as growth worries spooked
markets. 
    But Argentine stocks raced to record highs as data
showed industrial output jumped 13% in July, indicating that a
post-COVID economic recovery was on track.
    
    Key Latin American stock indexes and currencies:
    
                              Latest     Daily % change
 MSCI Emerging Markets         1325.18              0.06
                                        
 MSCI LatAm                    2467.18     ...