Latin America News
LAST UPDATE: June 3, 2025
Canada factory PMI rises in May but sector remains in contraction
Canada’s manufacturing sector contracted for the fourth consecutive month in May.
Insight
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) edged up to 46.1 in May from 45.3 in April, remaining below the 50 threshold that separates growth from contraction. The sector faces challenges from trade uncertainties, tariffs, and supply chain disruptions. Employment in manufacturing has declined, with the employment index falling to its lowest since June 2020. Despite slight optimism due to potential supportive government policies, the outlook remains uncertain amid ongoing economic pressures.
Chile’s economic activity rises 2.5% in April pushed by mining sector
Chile’s economic activity increased by 2.5% in April, driven by strong mining performance.
Insight
The Monthly Economic Activity Index (Imacec) rose 0.6% from March, surpassing expectations. The mining sector, particularly copper production, played a significant role in this growth, highlighting Chile’s dependence on its natural resources. While mining surged, other sectors like manufacturing and retail showed weaker performance. The data suggests that while the economy benefits from global demand for minerals, diversification remains essential for sustainable growth.
Chile’s Long Road to CPI Target Sees Peso Bonds Back in Favor
Investors are shifting from inflation-linked bonds to peso-denominated bonds, anticipating that Chile’s inflation will return to target levels.
Insight
The move towards peso bonds indicates growing confidence in Chile’s economic stabilization efforts. As inflation expectations align closer to the central bank’s targets, investors are seeking higher yields offered by peso bonds. This shift also reflects optimism about Chile’s fiscal policies and monetary discipline. However, the transition poses risks if inflation deviates from projections, potentially affecting bond valuations. The central bank’s communication and policy actions will be crucial in maintaining investor trust and economic stability.
Milei’s FX Gambit Sparks Sharpest Demand for Dollars Since 2019
President Javier Milei’s removal of foreign exchange controls has led to a surge in demand for U.S. dollars, reaching levels not seen since 2019.
Insight
The lifting of FX restrictions aims to liberalize Argentina’s economy but has triggered immediate capital flight as businesses and individuals seek dollar safety. This surge reflects underlying concerns about inflation and economic instability. While the policy aligns with free-market principles, its abrupt implementation without sufficient safeguards can exacerbate financial volatility. The central bank may need to intervene to stabilize the currency and prevent further erosion of reserves. Long-term success depends on restoring confidence through comprehensive economic reforms and transparent communication.
Brazil’s finance minister links potential IOF tax tweak to financial tax overhaul
Finance Minister Fernando Haddad suggests that any changes to the IOF tax will be part of a broader financial tax reform to address systemic issues.
Insight
The IOF tax hike faced political resistance, highlighting the need for a comprehensive review of Brazil’s financial taxation. Haddad’s approach to integrate IOF adjustments within a larger reform indicates an understanding of structural inefficiencies in the tax system. This strategy aims to create a sustainable fiscal framework rather than relying on temporary fixes. However, achieving consensus in Congress remains a challenge. The success of this overhaul will depend on balancing revenue generation with economic growth and investor confidence.
Mexico’s remittances plunge 12% in April
Remittances to Mexico fell by 12.1% in April, marking the steepest monthly decline since 2012, due to U.S. immigration crackdowns and economic uncertainties.
Insight
The significant drop in remittances underscores the vulnerability of Mexico’s economy to U.S. immigration policies and labor market conditions. Migrants’ fears of deportation and job loss have reduced both the number and size of remittance transactions. Additionally, proposed U.S. taxes on remittances could further deter these vital inflows. This decline impacts millions of Mexican households relying on remittances for basic needs. Policymakers must address this issue by engaging in diplomatic dialogues and creating domestic economic opportunities to reduce dependence on external income sources.
Venezuela ramps ups taxes on private sector as Chevron oil exit bites
In response to decreased oil revenues following Chevron’s exit, Venezuela is increasing taxes and public service fees on the private sector.
Insight
The government’s reliance on the private sector to compensate for lost oil income places additional strain on businesses already facing economic hardships. Increased taxes and fees can lead to reduced investment, layoffs, and business closures, exacerbating the country’s economic crisis. While the government seeks to maintain fiscal stability, these measures may hinder long-term economic recovery. A balanced approach that encourages private sector growth while diversifying revenue sources is essential for sustainable development.
