(Updates prices) By Ambar Warrick and Susan Mathew Feb 2 (Reuters) - Latin American currencies and stocks surged on Tuesday, with Brazil"s real leading gains on hopes of more stimulus measures and economic reforms in the country. The real jumped 1.7%, supported by a report that the Economy Ministry is planning new stimulus with limited fiscal impact. A second wave of COVID-19 cases in Latin America"s largest economy had damaged economic activity toward the end of last year, and the government marked a record budget deficit in 2020. Fiscal woes have taken a toll on sentiment of Brazilian assets lately. Brazil"s Congress on Monday chose lawmakers endorsed by President Jair Bolsonaro as speakers of its two chambers, raising the prospects of a resumption of the government"s reform agenda. As a result of the election, important debates - such as the federal budget, the Emergency Bill for Constitutional Amendment (PEC), and administrative and tax reform - will be resumed, said Credit Suisse analysts Solange Srour and Lucas Vilela. Data on Tuesday showed industrial output in 2020 marked its worst annual decline since 2016 due to the virus, but expanded in December as the economic recovery was sustained. "But the unwinding of fiscal stimulus and the rampant second wave of COVID-19 will hold back growth, and we think that Brazil"s economy will fare worse than most expect in 2021," said Nikhil Sanghani, Latam economist at Capital Economics. Broader risk appetite improved as investors awaited negotiations in the United States over a fresh COVID stimulus package. Mexico"s peso rose 1.2% to the dollar, supported by higher oil prices. The country"s main stock index surged as much as 3.6% and was set for the best session in two months. In Ecuador, ahead of presidential elections on Sunday, voters struggling under a battered economy are leaning toward a return to socialism. Ecuadorean bonds tumbled last month on the fiery rhetoric from presidential candidate Andres Arauz, an economist and protege of former leftist president Rafael Correa who has promised to tear up an austerity plan backed by the International Monetary Fund and proposed giving $1,000 to a million families within the first week of taking office. "There seems to be little appetite for harsh IMF-mandated fiscal austerity among the leading candidates. ... The public finances will therefore remain in dire straits, and sovereign default risks will stay high, regardless of who wins," said Capital Economics" Sanghani. "That said, a victory for left-wing populist Andres Arauz... may hasten a move towards a messy debt default," he added. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1381.95 1.53 MSCI LatAm 2374.92 2.69 Brazil Bovespa 118034.38 0.44 Mexico IPC 44095.66 2.58 Chile IPSA 4416.13 0.8 Argentina MerVal 49929.85 0.712 Colombia COLCAP 1372.57 1.14 Currencies Latest Daily % change Brazil real 5.3540 1.72 Mexico peso 20.1460 1.09 Chile peso 732.1 0.38 Colombia peso 3527.33 1.24 Peru sol 3.635 0.13 Argentina peso 87.7000 -0.09 (interbank) (Reporting by Ambar Warrick in Bengaluru Editing by Alistair Bell and Leslie Adler)