Latin America News
LAST UPDATE: June 5, 2025
Bank of Canada holds key rate steady, but says a future cut is possible
The Bank of Canada maintained its benchmark interest rate at 2.75%, citing uncertainties due to US trade policies, but indicated potential future cuts if economic conditions deteriorate.
Insight
The Bank of Canada’s decision to hold interest rates steady reflects a cautious approach amidst external economic pressures, particularly from US trade policies. The central bank acknowledges the risks posed by increased tariffs and their potential impact on inflation and growth. By signaling the possibility of future rate cuts, the bank aims to provide flexibility in responding to evolving economic conditions. This stance highlights the interconnectedness of global economies and the challenges central banks face in navigating external shocks.
Canada to Hold Off on Retaliating in Response to Higher U.S. Metals Tariffs
Canada has decided to delay retaliatory measures against the US’s increased tariffs on Canadian steel and aluminum, opting for a diplomatic approach while negotiations continue.
Insight
Canada’s choice to postpone retaliation against US tariffs demonstrates a strategic preference for diplomacy over immediate countermeasures. This approach aims to de-escalate potential trade conflicts and maintain constructive dialogue. However, it also exposes domestic industries to prolonged uncertainty and potential economic strain. The decision reflects the complexities of balancing national economic interests with the broader goal of preserving international trade relationships.
Canada Labor Productivity Nudges Up 0.2% in 1Q
Canadian labor productivity grew by 0.2% in Q1 2025, a slowdown from the 1.2% increase in Q4 2024, marking the first consecutive quarterly gains since the pandemic.
Insight
The modest productivity growth indicates a deceleration in economic momentum. Goods-producing sectors contributed positively, while service sectors declined. The decrease in unit labor costs suggests easing wage pressures. However, the overall slowdown may reflect underlying economic challenges.
Canada Services PMI Rises to 45.6 in May, Still Indicating Contraction
Canada’s services PMI increased to 45.6 in May from 41.5 in April, indicating a slower pace of contraction but still below the 50 threshold for growth.
Insight
The uptick suggests improving business sentiment despite ongoing challenges. Employment saw marginal growth, and future activity expectations rose. However, the sector remains under pressure from tariffs and economic uncertainty, necessitating cautious optimism.
Mexico vows countermeasures if US keeps steel tariffs
President Claudia Sheinbaum announced that Mexico will implement countermeasures next week if the US maintains its 50% tariffs on steel and aluminum imports.
Insight
Mexico’s stance reflects its commitment to protecting domestic industries and upholding trade agreements. The potential for retaliatory measures underscores the escalating trade tensions between the two nations. Diplomatic negotiations remain crucial to prevent further economic fallout.
Brazil plans to cut tax breaks, curb education spending in fiscal package, say sources
Brazil’s government is preparing a fiscal package aimed at reducing tax exemptions and limiting growth in education spending to address budget deficits.
Insight
The proposed measures indicate a shift towards fiscal consolidation. Reducing tax breaks and capping education funding growth may face political resistance but are seen as necessary steps to stabilize public finances. The success of these reforms will depend on effective implementation and stakeholder engagement.
Brazil Taps International Debt Markets for Second Time This Year
Brazil raised $2.75 billion through a dollar-denominated bond issuance, marking its second international bond sale in 2025, amid improved credit outlook.
Insight
The successful bond sale reflects investor confidence in Brazil’s economic prospects. The proceeds aim to enhance liquidity and provide benchmarks for corporate issuers. However, reliance on external debt underscores the importance of ongoing fiscal reforms to ensure long-term sustainability.
Brazilian prosecutors seek to block $180 million carbon credit deal
Brazilian prosecutors have filed a lawsuit to annul a $180 million carbon offset deal signed by the state of Pará with the LEAF Coalition, citing lack of community consultation and legal violations.
Insight
The legal challenge underscores the complexities of implementing large-scale environmental initiatives, especially when local communities are not adequately consulted. The case raises concerns about the legitimacy of carbon credit schemes and their compliance with national laws. It also highlights the tension between environmental goals and the rights of indigenous and traditional communities. The outcome could set a precedent for future carbon offset projects in Brazil and beyond.
Economy, politics, fresh competitors pose challenges to Argentine businesses
Argentine businesses are facing challenges due to political uncertainty, economic pressures, and increased competition, according to an EY survey.
Insight
The survey indicates that Argentine companies are navigating a complex landscape marked by shifting consumer demands, business risks, and global economic conditions. Political instability adds another layer of uncertainty, affecting investment decisions and strategic planning. The rise of new competitors, both domestic and international, is intensifying market competition. Businesses are focusing on operational improvements, technology adoption, and innovation to stay competitive. The findings suggest a need for policy stability and supportive measures to foster a conducive business environment.
