Latin America News
LAST UPDATE: June 10, 2025
Canada promises to boost defense spending, meet NATO target much earlier
Prime Minister Mark Carney announced on June 9 that Canada will accelerate its path to meeting NATO’s 2% GDP defense spending target within the current fiscal year—five years ahead of schedule—by increasing investments in submarines, drones, Arctic surveillance, and aircraft.
Insight
This commitment marks a pronounced strategic shift in Canada’s international posture, signaling a move toward greater self-reliance and alignment with NATO priorities. The defense buildup is expected to inject momentum into the domestic defense sector but also poses budgetary challenges, requiring delicate balancing with social spending. It may also influence other NATO members to reassess their own timelines for defense contributions.
Carney Rules Out Tax Increases to Finance Higher Canada Defense Spending
PM Carney clarified that Canada will not raise taxes to fund the defense expansion, opting instead to reallocate existing budget resources and pursue efficiency improvements.
Insight
By ruling out tax hikes, the government is signaling that defense spending increases will come from internal budget reprioritization and operational streamlining. While this sustains popular support, it places pressure on other public services to absorb cuts or yield efficiency gains. This fiscal strategy reveals a cautious, conservative approach aimed at bolstering national security without triggering public or economic backlash.
Chile-US Budget Contrast Pushes 30-Year Spread to Pre-Covid Lows
Bloomberg
Chile’s 30-year government bond yields have narrowed to less than 100 bp above comparable US treasuries, a level not seen since January 2020.
Insight
The compressed yield spread highlights growing confidence in Chile’s fiscal management relative to the US, where larger deficits are pressuring long-term borrowing costs. This movement suggests that investors perceive Chile’s combination of fiscal restraint and moderate deficits more favorably than the US’s expanding budgetary commitments.
Mexico’s inflation exceeds target, casting doubt on next central bank moves
Mexico’s annual inflation rose to 4.42% in May—above the upper limit of Banxico’s 3 ± 1% target—raising questions about the central bank’s upcoming monetary policy trajectory.
Insight
With inflation surging beyond target range, Banxico may need to pause or slow its easing cycle despite recent rate cuts aimed at jump-starting growth. The overheated price momentum complicates the balance between promoting economic activity and maintaining price stability, increasing the likelihood of a hold or even a pause in future rate reductions.
Mexico’s Auto Production, Exports Fall in May
In May, Mexico’s auto sector saw a decline in both output and exports, with production down 2% year-on-year to 358,209 units, and exports declining around 3%.
Insight
This downturn reflects the auto industry facing trade frictions and logistical challenges—particularly US tariffs and stricter originating rules under USMCA. The drop in exports, despite stable production, signals bottlenecks in cross-border supply chains, squeezing revenues from the crucial auto-export engine.
Mexico’s Sheinbaum eyes meeting with Trump at G7 summit
President Claudia Sheinbaum plans to attend the G7 summit in Canada (June 15–17) and is seeking a bilateral meeting with US President Donald Trump, where migration is expected to be a key topic.
Insight
This initiative reflects a pragmatic shift in Mexico’s diplomacy, seeking direct dialogue to address migration challenges and trade tensions with the US. Holding talks with Trump could ease friction and strengthen Mexico’s negotiating position, particularly as the USMCA renegotiation looms.
