* Colombian President Ivan Duque withdraws proposed tax reform * Brazil"s manufacturing sector decelerates * Chile"s economic activity jumps in March By Shashank Nayar May 3 (Reuters) - Colombia"s peso led losses across Latin American currencies on Monday, hitting a six-month low after the government withdrew a controversial proposed tax reform over the weekend. Colombia"s peso dropped nearly 2% and was set for its worst single-day fall since early January after President Ivan Duque said on Sunday he would withdraw a proposed tax reform amid deadly protests and widespread lawmaker opposition, though he insisted a reform is still necessary to ensure fiscal stability. Since the tax reform, which originally sought to raise more than $6 billion, was sent to Congress on April 15, the peso has depreciated 5.5%. Analysts also questioned the odds of a possible ratings cut which would place Colombia debt instruments below investment grade in case the policy is totally shelved. "If the reform is totally shelved, or alternatively if it is watered down much below the 0.7% level we’ve outlined, the rating agencies may question not only the path of debt dynamics but also future political commitment/ability to address the challenges down the road —a key consideration when deciding a cut from investment grade,” wrote analysts at J.P. Morgan in a note. The Chilean peso gained 0.4% after economic activity rose at its best pace since 2018 in March, an early sign of green shoots in the economy of the world"s top copper producer. Brazil" real, gained 0.5% even as growth in its manufacturing sector decelerated in April to its slowest rate since June last year. The data also showed prices charged to customers rose towards their recent historic highs, signaling higher inflation levels. Expectations of interest rate hikes, driven by high inflation, have supported the real. The currency of oil exporting nation, Mexico rose 0.2%, tracking a weaker dollar and a jump in oil prices on optimism over a strong demand rebound in countries including the United States and China. The Argentine peso dropped 0.1% after coronavirus cases hit 3 million on Sunday, highlighting concerns over a damaging wave of COVID-19 infections across Latin America. The Peruvian sol edged lower after presidential election front-runner, socialist Pedro Castillo, vowed to curb foreign firms "looting" the Andean nation"s mining wealth. Concerns over a socialist wave in Peru have rattled its financial markets this year, with the sol tumbling to record lows last month. Foreign net flows to emerging market equity and debt portfolios picked up in April as currency volatility ebbed, with flows to Chinese equities taking a large share of the total, data from the Institute of International Finance showed on Monday. MSCI"s index of Latin American currencies dropped 0.1%, while stocks gained 1.05%. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1343.43 -0.31 MSCI LatAm 2400.57 1.05 Brazil Bovespa 119772.91 0.74 Mexico IPC 48462.83 0.94 Chile IPSA 4526.12 1.19 Argentina MerVal 49332.49 0.563 Colombia COLCAP 1256.28 0.45 Currencies Latest Daily % change Brazil real 5.4021 0.52 Mexico peso 20.1774 0.24 Chile peso 706.9 0.42 Colombia peso 3813.75 -1.63 Peru sol 3.784 -0.01 Argentina peso 93.6700 -0.12 (interbank) (Reporting by Shashank Nayar in Bengaluru; Editing by Andrea Ricci)