EMERGING MARKETS-Colombia's peso leads rise among Latam FX after approving 2021 budget

* Colombia's congress approves biggest ever budget for 2021 * Latam recovery in doubt on fiscal woes, confidence shaky - poll * U.S., Brazil aim to double bilateral trade in 5 years * Sao Paulo stocks jump 2% as banks surge on recovery hopes (Updates prices throughout) By Shreyashi Sanyal Oct 20 (Reuters) - Colombia's peso rose the most among Latin American currencies on Tuesday after the country approved its largest ever budget for next year, while Brazil's Bovespa stock index led gains in the region. The peso rose 0.5% against a weaker dollar after the final approval to a 314 trillion peso ($81.7 billion) budget for next year by the country's congress, which is 8.3% higher than this year's. Brazil's real was flat, giving back gains made earlier in the day after U.S. ambassador to Brazil, Todd Chapman, said the U.S. and Brazil aim to double bilateral trade in the next five years from around $100 billion currently. This comes a day after investors cheered positive comments by Brazilian Economy Minister Paulo Guedes and the two countries agreed on steps to facilitate trade and investment in Latin America's biggest economy. "Guedes essentially emphasized that the government's commitment to fiscal rectitude and that the president will stand behind the Economy Ministry," said emerging markets FX strategists at Citigroup. A Reuters poll showed Latin America's tentative economic recovery from the coronavirus-related recession faces increasing doubts over gigantic budget gaps and dwindling investor confidence. The poll says confidence is waning among investors despite Brazil and Mexico's flattening COVID-19 curves and their economies showing signs of life. Most of Brazil's turnaround is fueled by a massive spending push, which has raised questions about its government's ability to break through its spending ceiling. Mexico's peso added 0.3%, while the Chilean peso firmed 0.2%. Brazil's real has fallen nearly 28% this year, the biggest decliner among major Latin American currencies, while Mexico's peso shed 10.5% so far in 2020. Business confidence has taken a hit in Mexico due to its government's rigid policy but a recent unveiling of a nearly $14 billion infrastructure investment plan has been well received by investors. Sao Paulo stocks jumped nearly 2% as shares of lenders were lifted by hopes of a recovery in the third quarter, with analysts projecting less money being set aside for bad loans. Unibanco Holding SA and Banco Bradesco SA were up 4% and 4.8%, respectively, while units in Banco Santander Brasil rose 2.9% and shares in Banco do Brasil SA gained 3.76%. In other news, cross-border lending to emerging markets fell in the second quarter for the first time since 2016, mainly driven by a decline of $43 billion in Latin America and the Caribbean, the Bank for International Settlements (BIS) said. Key Latin American stock indexes and currencies at 1955 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1133.92 0.59 MSCI LatAm 1944.00 1.77 Brazil Bovespa 100559.88 1.93 Mexico IPC 38132.98 1.27 Chile IPSA 3672.92 1.13 Argentina MerVal 49643.37 0.979 Colombia COLCAP 1183.04 0.69 Currencies Latest Daily % change Brazil real 5.6113 -0.12 Mexico peso 21.1150 0.35 Chile peso 785.7 0.19 Colombia peso 3823 0.52 Peru sol 3.599 -0.26 Argentina peso (interbank) 77.6600 -0.10 Argentina peso (parallel) 176 2.84 (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Bernadette Baum and Marguerita Choy)