Brazil's economy shrinks in Q 3 Mexican peso jumps 1.7% Updates prices by Ambar Warrick and Susan Mathew Dec 2 Reuters - Most Latin American currencies fell on Thursday, although sentiment remained fragile due to uncertainty over the Omicron coronaviruses variant, and as economic worries increased with data showing Brazil sank into a recession in the third quarter. Brazil's economy, Latin America's largest, contracted 0.1% in the three months to September due to surging inflation and severe drought. Brazil's economic rebound has slowed as inflation surged into double digits, forcing the central bank to raise borrowing costs aggressively. This comes as investors worry about the potential economic fallout from the Omicron variant as countries ramp up measures and travel curbs. Brazil's real rose by 0.3%, and it was supported by expectations of a better demand for iron ore exports to China. Brazilian stocks rose by 2.6% after recovering from a 13 month low. Analysts pointed out some positives for the economy going into 2022, especially for sectors that are yet to recover fully from the Pandemic. In a note from Goldman Sachs, analysts at Goldman Sachs wrote that some of the still COVID impacted services sectors in particular services to households should recover further in the coming months in combination with further progress on the COVID vaccine program and renewed fiscal stimulus. They see surging inflation and political uncertainty weighing on economic activity in the coming months. Brazil's Senate passed a text of a constitutional amendment that will allow the government's spending cap to be lessened and open room for a larger welfare program. Mexico's peso jumped by 1.7% after recovering from a more than one-year low last week. The Mexican president Andres Manuel Lopez Obrador's pick for the next central bank head, Victoria Rodriguez, underlined her commitment to central bank independence days after her nomination roiled markets amid concerns over political interference. Mexico is analyzing a range of responses to the proposed U.S. electric vehicle tax credit and would consider applying tariffs, according to Mexican Economy Minister Tatiana Clouthier on Thursday. Broader emerging market currencies recovered from recent losses on Thursday, although investors were awaiting more data on the COVID front. Turkey's lira dropped 3%. The central bank said it will pause rate cuts in 2022.