Mexican airline merger and rising household debt signal shifting economic landscape in Latin America

Mexico kicked off the week with a string of high‑stakes corporate moves and financial warning signs that together underscore how policy, markets and large private actors are reshaping Latin America’s economic landscape.

In Mexico City, President Claudia Sheinbaum publicly backed the proposed union of low‑cost carriers Viva Aerobus and Volaris while making clear the merger will face scrutiny from the nation’s antitrust authority. According to El País, Sheinbaum said the alliance could boost investment and competition in Mexico’s airline sector and should be reviewed “within the law”. The two carriers already account for roughly 69% of domestic passenger traffic through October, and industry analysts warn consolidation of that scale can reshape fares, route networks, airport slot allocation, aircraft‑leasing dynamics and credit risk for suppliers and lenders.

The same week brought a more worrying signal on household credit. Mexico’s largest mortgage lender, Infonavit, reported a delinquency rate of 19.40% as of September 2025, data confirmed by the Bank of Mexico’s Financial Stability Report and reported by El Economista. With Infonavit’s mortgage book at about MXN 1.9 trillion ($106 billion), its rising arrears have prompted large‑scale loan restructurings and raised concerns that deterioration at the state‑backed lender could transmit to housing finance costs and private credit expansion.

Across the region, sovereign finances and fiscal choices remained centre stage. Colombia’s debt trajectory kept markets on alert: fiscal stress after Congress rejected a financing law pushed the government to deploy emergency decree powers and seek COP 16 trillion ($4.1 billion) of measures, with external debt now projected to end 2025 near 58%–60% of GDP. That ratio, while below earlier official forecasts, still narrows policy room and heightens sensitivity to sovereign funding conditions, bank funding costs and corporate spreads.

Argentina’s fiscal story tightened further despite a change in budget arithmetic in Congress. President Javier Milei told audiences he will not veto the 2026 budget and intends to reallocate expenditures within the bill to preserve a “deficit zero” anchor, saying he will not resort to tax increases. Markets will watch execution closely: credibility will depend on whether those reallocations are feasible without undermining payment flows to vulnerable social programmes, regulated sectors or financing plans for 2026.

Policy‑driven cost shifts were visible elsewhere. A late‑year tax package in Argentina removed or reduced a range of levies and tariffs affecting agriculture, autos and imported technology, measures that can rapidly alter margins, investment incentives and the allocation of credit when banks and suppliers re‑price sectoral risk.

Peru moved closer to deepening trade ties with Asia after Mincetur announced a “substantial closure” on the most difficult chapters of a comprehensive trade agreement with Thailand, leaving only technical drafting work before signature and ratification. Peru’s exports to Thailand have been modest, about $92 million year‑to‑October 2025, but a deal could provide tariff savings and rules‑of‑origin certainty that support longer‑term capex in export chains.

Ecuador showed a striking policy contrast: reserves hit a record $10.245 billion on December 12, 2025, largely boosted by higher gold valuations, yet fiscal pressures persisted as 2025 spending growth pushed the deficit up, according to local reporting by Primicias. The government moved diesel pricing from a fixed level to a market‑linked scheme on December 12 as part of subsidy reform. In a fully dollarised economy, robust reserves bolster confidence, but persistent deficits can still force tightening and raise risk premia for banks and issuers.

In Chile, mining giant BHP launched an “expression of interest” for a large, long‑dated power procurement to serve its Chilean operations, with a volume estimated at 4–6 TWh per year and supply scheduled to start on 1 January 2032. Industry participants and project financiers view such long‑term auctions as critical to locking in mining operating costs and creating bankable pipelines for generators, grid investment and project finance.

Paraguay’s state utility, ANDE, signalled a return to more automatic tariff adjustment mechanisms for the first time since 2017. ANDE is still finalising a semi‑automatic formula and signalled no general tariff hike for 2025, but said it is studying gradual automatic changes focused on large industrial users and crypto miners and estimated the distribution system needs about $600 million per year in investment. The move would affect industrial competitiveness, inflation expectations and the utility’s financing capacity.

Finally, Uruguay’s financial sector showed resilience even as the economy cools. Itaú’s CEO said the bank expects to close 2025 with return on equity around 30% and profits above $200 million, with corporate loan stock near $4 billion and broad‑based credit growth including SMEs. He also warned proposed changes to bank secrecy rules would be harmful, highlighting the perennial tension between regulatory reform and financial sector stability.

Taken together, the week’s developments show a region navigating simultaneous pressures: corporate consolidation and strategic procurement decisions are reshaping private‑sector risk and investment horizons, while sovereigns and state‑linked institutions confront fiscal strain that will test market confidence and policy credibility into 2026.