* Brazil's Vale reports decrease in Q1 iron ore output * Brazil discusses oil output increase with United States * Eletrobras pares gains on privatization delay doubts (Recasts, updates prices) By Susan Mathew and Shreyashi Sanyal April 20 (Reuters) - Brazil's real rose 1% on Wednesday with the government in talks with Washington to increase Brazil's oil output to cap crude prices, while Vale dragged on Sao Paulo's Bovespa stock index on lower iron ore production. The real, which rallied against a sliding dollar, is on track for its sixth straight month of gains, benefiting from a spike in commodity prices, tight monetary policy and lack of direct exposure to the Russia-Ukraine war. With a current crude output of around 3 million barrels of oil per day (bpd), Brazil is aiming for a 10% increase to 3.3 million bpd in 2022, Energy Minister Bento Albuquerque said in a Reuters interview, as the war sends prices soaring. "Currencies of Brazil, South Africa, Peru, Chile, and Colombia, whose weakness fueled inflation during the COVID crisis, have now strengthened on the back of higher-priced commodities," said Lucila Bonilla, emerging markets economist at Oxford Economics. Shares of state-run oil major Petrobras inched up, but the Bovespa stock index slipped 0.8% as miner Vale lost 2.9% after first-quarter iron ore production fell 6.0% from the previous year. Brazilian steelmaker Usiminas dropped 7.3% as it reported a 49% sequential decline in first-quarter net income, while cosmetics maker Natura dropped 14.6% after its quarterly revenue missed estimates. State-run power company Eletrobras was last up 1.8%, cutting a chunk of its 5.4% session gains after government officials warned that a federal audit court may further delay a ruling on the company's privatization, which could derail plans to complete the process before this year's election. Investors will also be looking out for the release of some economic indicators in Brazil after central bank employees approved the suspension of a strike that began earlier this month over wage demands. With U.S. Treasury yields falling after a surge, the dollar lost some shine, helping keep Mexico's currency buoyed, while Chile's peso gained 0.5%. But fall in oil prices in Wednesday on demand worries weighed on exporter Colombia's peso. Stocks in the country rose 0.5%, while in Mexico, shares dropped 1.5% for their worst session in more than six weeks. The broader emerging market stocks index was marginally lower as heavy-weight China stocks lost more than 1% overnight after central bank stimulus disappointed. Latin American stock indexes and currencies at 1932 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1095.64 -0.03 MSCI LatAm 2584.08 0.06 Brazil Bovespa 114165.83 -0.77 Mexico IPC 53837.07 -1.46 Chile IPSA 4955.22 0.88 Argentina MerVal 92159.07 0.131 Colombia COLCAP 1611.93 0.52 Currencies Latest Daily % change Brazil real 4.6239 0.91 Mexico peso 20.0275 -0.11 Chile peso 814.5 0.59 Colombia peso 3755.41 -0.26 Peru sol 3.713 -0.27 Argentina peso 113.9600 -0.15 (interbank) (Reporting by Shreyashi Sanyal in Bengaluru; editing by Barbara Lewis and Grant McCool)
