EMERGING MARKETS-Weak copper prices weigh on Chile's peso, Turkish assets extend losses

* Chile's peso leads declines among Latam FX * Mexican peso slips from 7-year highs * Brazilian lawmaker proposes to toughen new fiscal rules (Updates prices throughout, adds market details) By Amruta Khandekar, Khushi Singh and Ankika Biswas May 16 (Reuters) - Most Latin American currencies fell on Tuesday, with the Chilean peso leading declines on a slide in copper prices, while the rout in Turkish markets deepened following President Tayyip Erdogan's strong showing in the elections. Weighing on the Chilean peso was declining copper prices as data from top consumer China suggested that the country's economic recovery was losing momentum. The currency of the top exporter of the red metal was down 1.5%, while Peru's sol, the currency of the second- biggest copper producer, fell 1.2%. The Mexican peso slipped 0.2%, a day after hitting its highest level since May 2016. The Bank of Mexico is expected to hold the country's benchmark interest rate on Thursday, halting a cycle of rate hikes that began in June 2021, a Reuters poll showed. The Brazilian real dropped 1% against the greenback. Brazil's proposed new fiscal rules, unveiled in late March, have been toughened to include sanctions in case of non-compliance with public accounts targets, according to a revised version of a bill presented late on Monday by Claudio Cajado, a member of Congress. Meanwhile, the country's Finance Ministry is preparing a new set of initiatives to increase tax revenue, including a review of deductions and exemptions for income tax on individuals, Reuters reported. Colombia's peso slipped 0.8%, a day after the country posted better-than-expected economic growth in the first quarter. Analysts at Scotiabank expect Colombia's central bank to hold rates steady at 13.25% at its June meeting and then possibly start to discuss rate cuts at the October meeting. The U.S. dollar rose after data showed retail sales in April were lower than expected but suggested a firm underlying trend, with investors remaining skittish about the debt ceiling issue. "The key question that will set the tone for emerging markets is when the Fed may start cutting interest rates and so far inflation has been sticky, so room to cut interest rates is looking fairly limited for the Fed," said Piotr Matys, senior FX analyst at In Touch Capital Markets. Latin American stocks were down 0.6%, with Chile's benchmark stock index bucking the trend with a 0.3% advance. Brazil's state-run oil company Petrobras said it approved a new commercial strategy to set diesel and gasoline prices, which Mines and Energy Minister Alexandre Silveira believes should help bring down inflation and convince the central bank to lower interest rates. Shares of Petrobras jumped 3%. Meanwhile, Turkey's market rout deepened amid investor expectations that Erdogan will be able to extend his rule - and his unorthodox economic policies - into a third decade. The lira was on track to set a fresh closing record low, last trading at 19.74 per dollar. Key Latin American stock indexes and currencies at 1950 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 978.29 0.08 MSCI LatAm 2316.10 -0.58 Brazil Bovespa 108536.27 -0.45 Mexico IPC 55207.94 -0.1 Chile IPSA 5613.34 0.28 Argentina MerVal 319769.92 -0.254 Colombia COLCAP 1140.41 -0.67 Currencies Latest Daily % change Brazil real 4.9410 -1.06 Mexico peso 17.4680 -0.19 Chile peso 797.8 -1.49 Colombia peso 4531.5 -0.79 Peru sol 3.6851 -1.18 Argentina peso (interbank) 231.1000 -0.17 Argentina peso (parallel) 483 0.00 (Reporting by Amruta Khandekar, Khushi Singh and Ankika Biswas in Bengaluru Editing by Marguerita Choy and Matthew Lewis)