Mexico's S&P/BMV IPC stock index ticked up to a new all-time high. "There are chances for even more record highs due to the expectation of good earnings reports this week," said James Salazar, a strategist at CI Banco.

Shares of Wal-Mart de Mexico and mining, rail and infrastructure company Grupo Mexico both rose less than 1 percent ahead of their second quarter earnings reports this week.

But shares of Coca-Cola Femsa, the world's largest Coke bottler, fell more than 5 percent after the company said it was poised to lose a key distribution contract in Brazil.

In Brazil, yields on short-term interest rate futures fell as the market tilted toward bets for a 100 basis point cut on Wednesday by the country's central bank.

In its last decision, Brazil's central bank said it could slow the pace of cuts from 100 basis points per meeting due to growing political turmoil, driving many investors to bet on a smaller 75 basis-point reduction in July.

Those bets lost steam after Congress approved a revamp of the country's labor laws by a wide margin, suggesting resilient lawmaker support for President Michel Temer's reform platform despite corruption allegations against him.

Analysts and traders said the future path of interest rates will hinge on the approval of other reforms needed to curb growth of public debt.

"It is yet to be seen how the central bank will approach the pension reform paralysis," CM Capital Markets economist Camila Abdelmalack said, referring to successive delays to Temer's plans to streamline the country's social security system.

Reforms are also key to extend the Brazilian real's rally as it looks set to post the biggest gain among Latin American currencies this month, traders said.

The currency seesawed on Monday, hovering near 3.15 reais to the greenback. In a Monday note to clients, strategists at BNP Paribas recommended clients purchase the real, betting that it will breach the 3.00 threshold by the end of the year.