* Brazilian stocks also fall * Chile"s peso helped by copper prices By Ambar Warrick Oct 19 (Reuters) - Brazil"s real dropped close to six-month lows on Tuesday as government plans for more welfare raised concerns of stretched fiscal spending, while most other Latin American currencies recouped some recent losses as the dollar retreated. The real tumbled 0.6% to 5.5531 to the dollar, trading around levels last seen in April as the speaker of the lower house of Congress signaled he might be open to discuss the introduction of a welfare program that could break the country"s spending ceiling. Reuters also reported that Brazil"s government is considering combining COVID-19 pandemic relief payments and family welfare programs into a monthly stipend next year. But the intended reforms have brought into question whether the government will be able to foot the bill, especially considering that fiscal spending was already stretched due to the pandemic. A higher budget deficit and more debt issuance are likely to damage Brazil"s financial credibility. Rising inflation is also expected to erode growth in Latin America"s largest economy. Brazilian stocks also slumped 1.9%, with financial stocks sensitive to interest rates weighing the most. Other Latin American currencies fared better, recovering from recent losses made on concerns over slowing Chinese economic growth. Mexico"s peso rose 0.5%, while Colombia"s peso inched up as it resumed trade after a holiday. But most emerging market currencies have tumbled in recent sessions, as investors grew increasingly concerned over rising inflation. While emerging market central banks are expected to tighten policy to cope with higher prices, they also run the risk of raising rates too quickly and further hampering growth. "The risk is that markets and central banks misread the current shocks, leading to fast-rising inflation expectations or premature monetary tightening," analysts at BlackRock wrote in a recent note. "We expect this to play out differently around the world, and could see central banks that worry about their handle on inflation expectations take a more hawkish approach than others," they said. Most central banks in Latin America have already begun hiking rates, with Brazil and Mexico leading the charge. Chile"s peso rose 0.4%, tracking strength in copper prices as supply disruptions Peru, a major producer, drove up rates for the red metal. Peru"s sol fell slightly after a community said it will block a key mining road used by the Las Bambas copper mine in protest after failed negotiations with the government. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1295.75 0.99 MSCI LatAm 2241.11 -1.42 Brazil Bovespa 112298.76 -1.86 Mexico IPC 52548.74 -0.26 Chile IPSA 4018.89 0.25 Argentina MerVal - - Colombia COLCAP 1418.91 -0.51 Currencies Latest Daily % change Brazil real 5.5531 -0.59 Mexico peso 20.3060 0.48 Chile peso 813.8 0.36 Colombia peso 3765.83 0.02 Peru sol 3.9418 -0.02 Argentina peso 99.3000 -0.02 (interbank) (Reporting by Ambar Warrick Editing by Paul Simao)