Welcome back to Foreign Policy’s Latin America Brief.

The highlights this week: Argentina tests out its new currency regime, Mexico and the United States hash out a water dispute, and Trinidad and Tobago elects a new leader.

Power to the Peso

Argentine President Javier Milei was elected in 2023 on promises to dramatically overhaul the country’s long-suffering economy. He said public spending cuts and deregulation would vanquish runaway inflation and restore stability.

Milei’s success was far from guaranteed. Argentina’s economy is tightly controlled, and though its leaders have tried pro-market reforms in recent decades, they have often abandoned them.

Last month, Milei’s administration loosened Argentina’s capital and currency controls with support from a new International Monetary Fund (IMF) deal. That carried risks: People who lack confidence in the Argentine economy might sell their pesos for U.S. dollars or send their money abroad. When Argentina removed the controls in 2016, the peso crashed, and inflation shot up.

But Milei seems to have passed a key test: So far, that has not happened this time. Milei’s policy approach was more “sophisticated,” said Florencia Fiorentin, an economist at the Argentine consultancy EPyCA. Rather than the peso floating freely against the U.S. dollar, it is now allowed to float between an upper and a lower limit that will widen over time.

Argentina’s central bank committed to buying up pesos if necessary to enforce this so-called partial float system. But to do that, it needed more reserves, which is where the IMF came in. The fund confirmed a new $20 billion loan for Argentina ahead of the partial float.

In the nearly three weeks since the government enacted the partial float, the value of the peso has not changed dramatically, settling around the middle of the target range. The Milei administration declared victory: Economy Minister Luis Caputo posted on social media that the occasion called for a “wave of apologies from colleagues and journalists” who predicted an abrupt drop in the peso’s value.

The new IMF deal is also indicative of strong U.S.-Argentina relations since U.S. President Donald Trump took office in January. The United States is the IMF’s biggest shareholder. During Trump’s first term, the fund fast-tracked a loan to Argentina, which was then led by President Maurício Macri, a friend of Trump’s. Milei has quickly cozied up to the U.S. president.

The Trump administration’s acting representative to the IMF previously abstained from weighing in on loan decisions, but she endorsed the new deal with Argentina, Bloomberg reported last week. Some board members reportedly felt pressured to back it.

The prospect that U.S. political alliances could affect the fund’s lending is a touchy one at an organization that prides itself on technical expertise. The IMF’s Western Hemisphere director told reporters in Washington that the deal was approved “following a very rigorous evaluation.”

At its annual spring meetings last week, the IMF voiced full-throated support for Milei’s effort. “This time, it is different,” IMF Managing Director Kristalina Georgieva said of Argentina’s reforms. The fund forecasted 5.5 percent growth for the country this year, a rate that Fiorentin called “very optimistic.”

As Argentina heads toward midterm elections in October, Georgieva said that “it is very important that they don’t derail the will for change.” She also posed for a photo wearing a gift from an Argentine official: a lapel pin of a chainsaw, the symbol of Milei’s campaign to slash bureaucracy.

Georgieva’s remarks prompted accusations that the IMF is meddling in Argentina’s internal politics. One opposition politician said the fund should investigate her conduct, calling it “irresponsible.”

But Argentines might not have been Georgieva’s only intended audience. Trump’s combative stance toward multilateral institutions prompted fears ahead of the IMF and World Bank spring meetings that the United States might try to withdraw from or seriously hinder the organizations. Meanwhile, the White House has made clear its desire to support Milei, with Treasury Secretary Scott Bessent traveling to Buenos Aires in April.

At the spring meetings, Bessent announced no plans to withdraw from the IMF, but he said it should focus less on climate change and gender issues.

For Milei, April was a month of important milestones. But the leader will face further tests down the line. Though Fiorentin said the peso float was “managed very well,” she added that Milei’s austerity and reduced real wages in Argentina were “unsustainable.”

Upcoming Events

Monday, May 12, to Tuesday, May 13: Brazilian President Luiz Inácio Lula da Silva visits China.

What We’re Following

Brazilian Foreign Minister Mauro Vieira speaks during a meeting of BRICS foreign ministers in Rio de Janeiro on April 28.Mauro Pimentel/AFP via Getty Images

BRICS meeting. Foreign ministers from the BRICS grouping met in Rio de Janeiro this week, focusing on how member states could oppose unilateral trade measures and deepen commerce amid Trump’s global trade war. Since 2023, BRICS has expanded its membership from five to 10 countries: previous members Brazil, Russia, India, China, and South Africa and new ones Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates.

This has created more frequent contact among these countries, but the foreign ministers’ meeting also showed the group’s growing pains. After disagreements over diversifying the U.N. Security Council, the countries did not sign a joint statement this week. Brazil, which led the meeting, instead issued a declaration of its own.

Despite expressing interest in BRICS membership, Saudi Arabia has still not completed its full accession to the bloc. Brazil’s foreign ministry told reporters that Saudi Arabia was one of the main participants in the summit—rather than in a second tier of “partner countries”—but its envoy did not appear in the main meeting photograph.

By expressing interest in BRICS, Riyadh may seek to gain leverage with Washington amid separate bilateral negotiations, Oliver Stuenkel and Margot Treadwell wrote in Foreign Policy in March.

Mexico-U.S. water tensions. Mexico and the United States reached a deal for Mexico to transfer water from the Rio Grande and separate reserves to southern Texas under the terms of a 1944 bilateral treaty, the U.S. State Department said on Monday. Trump recently accused Mexico of breaching the agreement, which requires Mexico to regularly send water across the border from tributaries of the river.

The topic has become increasingly sensitive as farmers in both countries—who are influential political groups—have faced drier conditions. In 2020, farmers in northern Mexico took over a dam that sends water to the United States. Both countries said they planned keep cooperating to address water scarcity in the border region.

Chile commemorates Carabineros. Chile on Sunday marked a commemorative day that is unusual in Latin America: a holiday devoted to the country’s military police, the Carabineros. The Carabineros maintain a particularly strong linkage to Chile’s past military government, and public sentiment toward them is often a clear marker of political identity.

Chilean far-right politician José Antonio Kast, who plans to run for president this year, released a short film for the holiday. It offered sympathetic portrayals of officers, including some who were accused of wounding people during Chile’s 2019 mass protests. Current President Gabriel Boric, a leftist, defended some of the causes raised in those demonstrations.

According to pollster Cadem, while public approval of the Carabineros was below 40 percent around the time of the 2019 demonstrations, it had risen to 75 percent last month.

Question of the Week

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In Focus: Trinidad and Tobago’s Election

Kamla Persad-Bissessar, the leader of Trinidad and Tobago’s United National Congress party, speaks to supporters during a rally in the country’s capital of Port of Spain on April 26.Prior Beharry/AFP via Getty Images

A snap parliamentary election in Trinidad and Tobago on Monday returned centrist former Prime Minister Kamla Persad-Bissessar to power. The vote underscored concerns about crime in the country of around 1.5 million people.

Last December, rising violence led outgoing Prime Minister Keith Rowley to declare a state of emergency in Trinidad and Tobago. The country’s homicide rate was one of the highest in Latin America and the Caribbean last year. In March, Rowley announced that he would step down and handed leadership to the energy minister, Stuart Young.

Young, seeking a popular mandate, then called a snap election. His center-left People’s National Movement saw its representation in the lower legislative chamber shrink to around half of that held by Persad-Bissessar’s United National Congress and its allies. The center-left had ruled Trinidad and Tobago for 10 years.

Hamid Ghany, a political analyst at the University of the West Indies, told the Guardian that Trinidad and Tobago may now tilt more toward the United States, “given the favourable disposition of Kamla Persad-Bissessar towards Trump.”

In recent weeks, the United States revoked the license for two natural gas projects jointly developed between Trinidad and Tobago and Venezuela.

Persad-Bissessar, 73, is the only woman to have led Trinidad and Tobago. Her return to office brings the number of Caribbean Community countries led by women up to two.