⚖️ Public Debt

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From France’s budget debacle to the multi-trillion-dollar hole blown into the US debt by the so-called Big Beautiful Bill, it seems that we’re in a rare moment where people are actually interested in what their governments are spending money on.

Many countries, even traditionally austere ones like Germany or South Korea, are today spending above their means as they seek to stimulate economic activity, rebuild defense or manufacturing bases, or simply – in the case of the US – pay for massive tax cuts and increases to the budgets of both immigration enforcement and border security.

Now, most of Latin America’s largest economies are running a fiscal deficit this year, meaning they’re spending more than they’ve collected in taxes and revenue. Brazil has been tapped as a particularly egregious offender, with a projected deficit of over 7% in 2025, which is even worse than last year’s end result.

To service this debt, most Latin American governments turn to the capital markets, borrowing from investors (either their own citizens or foreigners) to finance today’s costs with tomorrow’s money, so to speak. And depending on their capital markets, they’re more or less vulnerable to external shocks and speculation.

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