Shortly before the presidential election in Argentina, China is giving the South American country’s ailing economy further financial leeway. Argentina will receive up to 47 billion yuan (around 6 billion euros) through a central bank reserve exchange (swap), said Argentine President Alberto Fernández after a meeting with Chinese head of state Xi Jinping at the “New Silk Road” forum in Beijing. “This means a great relief for Argentina,” said Fernández.
With the fresh money from Beijing, Argentina will be able to pay for its imports from China with yuan in the future and thus conserve its scarce dollar reserves. Although the Argentine government has to pay interest on this, this is below the interest rate that is due on loans from the International Monetary Fund (IMF). Several tranches of the IMF loan will have to be repaid in the coming months. Argentina is in debt to the monetary fund for around $44 billion.
South America’s second largest economy is in a severe economic and financial crisis. The central bank hardly has any foreign reserves left, and the local currency, the peso, continues to depreciate against the dollar. The economic problems are also the focus of the presidential election next Sunday. The libertarian populist Javier Milei, who is the favorite in the vote, wants to introduce the US dollar as the official means of payment in Argentina. The self-proclaimed “anarcho-capitalist” has also announced that he no longer wants to do business with China.
China is Argentina’s second most important trading partner with a volume of $25.4 billion. Beijing is also financing investments in the South American country’s infrastructure with almost $24 billion. “Whenever we experience a difficult moment, Xi Jinping’s government helps us,” said Fernández after the swap deal was concluded. “This is important so that production does not come to a standstill.”
