EMERGING MARKETS-Chilean peso set for best month ever; Brazil's real slips

* Chilean peso bests regional peers with 8.6% jump in July * Colombia cuts interest rate, sees steeper economic contraction * Brazil's real pressured by record deficit, debt figures * Colombia's peso lags in July on oil price outlook (Updates Prices) By Shreyashi Sanyal and Susan Mathew July 31 (Reuters) - Chile's peso rose on Friday and was set for its best month on record, aided by improving signs of demand for copper from top consumer China, while the Brazilian real weakened after central bank figures showed a record rise in national debt. The peso gained 0.6% and outperformed its regional peers with an 8.6% jump in July. Prices of copper, Chile's biggest export, ticked higher after strong factory activity data from China. Prolonged lockdown restrictions in Chile have also helped contain the spread of the novel coronavirus in the country. Capital Economics analysts say Chile is seeing the fastest decline in new per capita coronavirus cases of any major emerging market. "If this trend continues, the drag from cautious household behavior may fade more quickly in Chile than elsewhere in the region." MSCI's index for Latin American currencies rose 5% in July, set for its biggest monthly gain in 2020 after the dollar tracked its worst month in a decade, on doubts over a U.S. economic rebound as the country struggles to contain its coronavirus outbreak. Colombia's peso dropped after the central bank cut Colombia's interest rate by 25% as expected, and now expects gross domestic product to contract between 6% and 10% this year, worse than a previous range of 2% to 7%. The currency lagged its regional peers in July, hit by a worsening outlook for oil prices tied to a decline in demand from the United States. Brazil's real fell 1% after the country's national debt rose to a record 85.5% of gross domestic product and the public sector registered a record $36.5 billion primary deficit in June. Latin America's biggest economy's currency was still set for a monthly gain of nearly 5%, with investors keeping a close eye around developments on a new tax reform. Economy ministry estimates say the creation of a new value-added tax in Brazil by combining two federal taxes paid by companies could generate up to 373,000 jobs. The Mexican peso continued to decline for the second straight day, after data showed the economy shrunk by a record-breaking 17.3% during the second quarter. The currency was still up for the month. Except Mexico's Ipc, most major stock indexes in the region rose this month as hopes of a COVID-19 vaccine and ample global stimulus drove hopes of an economic recovery. On Friday, however, most indices fell with Brazil's Bovespa set for its worst day in over a month. Key Latin American stock indexes and currencies at 1846 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1077.30 -0.44 MSCI LatAm 2059.29 -2.03 Brazil Bovespa 102857.64 -2.05 Mexico IPC 36774.44 -0.98 Chile IPSA 3963.37 0.25 Argentina MerVal 49318.00 -0.178 Colombia COLCAP 1151.75 -1.11 Currencies Latest Daily % change Brazil real 5.2103 -1.03 Mexico peso 22.2130 -0.94 Chile peso 756.9 0.53 Colombia peso 3731.91 -0.29 Peru sol 3.5317 -0.56 Argentina peso 72.3100 -0.07 (interbank) (Reporting by Shreyashi Sanyal in Bengaluru Editing by Paul Simao and Jonathan Oatis)