* Chilean peso rises as copper surges to eight-year high * Brazil economic activity fell 4.05% in 2020 - central bank index (Updates prices) By Susan Mathew Feb 12 (Reuters) - Latin American currencies erased early losses to firm on Friday against a steady dollar, with Chile"s peso leading gains as prices of its main export, copper, surged to eight-year peaks. Chile"s peso rose 0.7%, taking weekly gains to more than 2% - its best week in two months. Copper prices rebounded as investors took advantage of a pullback to add to their bullish positions, betting demand will keep outpacing supply. Mexico"s peso was flat a day after the country"s central bank cut interest rates for the first time since September, by 25 basis points to 4%. "There was a dovish surprise in that the decision to cut ... was unanimous," wrote Sacha Tihanyi, deputy head of emerging markets strategy at TD Securities. "We believe that Banxico is stating that so long as inflation expectations remain stable and there are no unexpected near-term shocks to prices, the door remains open to further easing." On the week, the peso looks to mark its second straight week in the black, with higher oil prices contributing to the currency"s gain. Fellow crude exporter Colombia"s peso surged to three-week highs on Friday as oil prices rose, taking weekly gains to 1.7% - the best since the beginning of the year. The Brazilian real reversed early losses and was up marginally, but is set to record losses for the week as worries remains of the government"s finances. Brazil will extend pandemic emergency cash transfers to the poor and vulnerable, Economy Minister Paulo Guedes said on Thursday, but added that the payments must come with compensating cost-cutting measures to avoid damage to public finances. Economic activity in Brazil fell 4.05% last year, a central bank index showed, with the economic blow from the COVID-19 pandemic for the year as a whole softened by an eighth consecutive month of growth in December. Markets were also hopeful that U.S. President Joe Biden"s planned coronavirus relief package will be passed by lawmakers soon. Elsewhere in Latin America, data showed oil output from the Vaca Muerta region in Patagonia, which stalled during the coronavirus pandemic, hit a record high in December as producers revved up wells with an eye on rebounding prices and a new export market. The region holds the world"s fourth-largest shale oil reserves. Stocks markets in the region were mixed, with Chilean stocks scaling three-week highs, while Brazil"s Bovespa I index fell 0.2%. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1429.59 0.12 MSCI LatAm 2408.60 0.08 Brazil Bovespa 119081.41 -0.18 Mexico IPC 44196.80 0.31 Chile IPSA 4599.71 1.13 Argentina MerVal 51357.62 -0.575 Colombia COLCAP 1363.09 -0.34 Currencies Latest Daily % change Brazil real 5.3822 0.09 Mexico peso 19.9375 0.03 Chile peso 721.9 0.32 Colombia peso 3494.5 0.86 Peru sol 3.6437 -0.11 Argentina peso 88.5300 -0.09 (interbank) (Additional reporting by Shashank Nayar and Shreyashi Sanyal in Bengaluru; Editing by Jan Harvey and Jonathan Oatis)