* Brazilian real at highest level since June 16
    * Brazil's tax reform push a step in the right direction-
analysts
    * Mexican retail sales inch up in May 
    * Argentina's $65 bln debt deal inches closer despite
standoff

 (Adds background, updates prices)
    By Shreyashi Sanyal and Ambar Warrick
    July 22 (Reuters) - Brazil's real jumped on Wednesday,
leading gains across Latin American currencies as proposed tax
reforms in the region's largest economy were well received by
investors, even as U.S.-China tensions rose.
    The real firmed about 2% to more than a
one-month high after Economy Minister Paulo Guedes on Tuesday
delivered the first part of the government's proposals to
congressional leaders, which will combine two federal
consumption taxes into a single value added tax.
    Analysts at Capital Economics said the push by Brazil
provided a welcome sign that the government's reform agenda is
still progressing, despite the political infighting caused by
the handling of the coronavirus crisis.
    "If implemented, the main benefits would accrue over the
longer-term by improving potential GDP growth. More immediately,
it would probably help to lower longer-term bond yields."
    In another encouraging sign, data showed Brazilian
industrial confidence rose sharply in July, extending the
rebound initiated in May as the outlook for the coming months
across the sector continued to brighten.
    Brazilian stocks, however, came off their highest
level since early March. Stocks in Latin America, particularly
Brazil, have rallied recently on hopes of a coronavirus vaccine.
    The scaling back of virus-driven lockdowns in the country
has also produced some optimism over an economic recovery.
    The Mexican and Colombian pesos came under
pressure from softer oil prices, following a surprise rise in
U.S. crude inventories.
     Markets shrugged off the latest form of escalation between
U.S.-China relations after the United States told China to close
its consulate in Houston. 
    Data showed Mexican retail sales nudged up 0.8% in May from
April, but posted another massive drop on an annual basis due to
lockdown measures, while a separate survey by Citibanamex showed
Mexico's central bank will likely cut its interest rate by 50
basis points at its next monetary policy meeting in August.
  
    Argentina and its creditors are likely to find a way to seal
a $65 billion debt restructuring deal, analysts said, despite a
standoff after bondholders joined forces to reject a government
proposal and put forward one of their own. The Argentine peso
 was flat, while stocks rose more than 2%. 

    The Peruvian sol weakened against the dollar as civil
unrest hit the country.
    Protesters attacked a convoy of vehicles from the Las Bambas
mining group, one of the country's largest copper producers, and
set fire to some of them.
    Key Latin American stock indexes and currencies;
    
    Stock indexes             Latest       Daily % change
 MSCI Emerging Markets         1076.24                  -0.89
                                        
 MSCI LatAm                    2106.66                   1.87
                                        
 Brazil Bovespa              104033.83                  -0.26
                                        
 Mexico IPC                   37227.16                   0.94
                                        
 Chile IPSA                    3928.55                   1.06
                                        
 Argentina MerVal             47861.05                  2.308
                                        
 Colombia COLCAP               1170.51                   0.33 Currencies             Latest       Daily % change
 Brazil real                    5.1010                   2.15
                                        
 Mexico peso                   22.3667                  -0.15
                                        
 Chile peso                        768                   0.40
                                        
 Colombia peso                 3635.62                  -0.38
 Peru sol                       3.5078                  -0.40
                                        
 Argentina peso                71.7700                  -0.07
 (interbank)                            
                                        
 
 (Reporting by Shreyashi Sanyal in Bengaluru
Editing by Marguerita Choy and Jonathan Oatis)