Argentina China Currency Swap to Strengthen Economic Ties

Argentina and China have strengthened their economic ties through a currency swap agreement. This move aims to boost trade and investment between the two nations.

The swap deal allows Argentina to access Chinese yuan for up to $1.5 billion. This will help Argentina meet its foreign exchange needs and reduce its reliance on the US dollar.

Argentina has a significant currency swap deal with China, with the People's Bank of China making $6.5 billion available to Argentina as an extension of the currency swap deal in October 2022.

The deal was initially negotiated by former president Alberto Fernández, who requested $5 billion but received an additional $1.5 billion from Chinese President Xi Jinping.

Argentina's new president, Javier Milei, has been criticized for his stance on China, stating that he would not "negotiate" with "communists" during his campaign.

However, Milei has since sent a formal request to Xi asking to unlock the exchange of foreign currency, and Chinese officials have expressed a willingness to work with Argentina's new government.

Argentina's economy ministry source said there could be news around the trip of Economy Minister Sergio Massa and central bank chief Miguel Pesce to China from May 29 to June 4, but gave no details.

Argentina is rebuilding its reserves to cover trade costs and future debt repayments, as well as to meet economic targets under its $44 billion loan program with the International Monetary Fund (IMF).

Argentina is nearing a deal with China that will add the equivalent of $9 billion to its reserves. This new agreement will help boost the country's dwindling reserves, which have fallen sharply this year due to a major drought and 109% annual inflation.

Argentina's central bank chief, Guido Sandleris, has confirmed that the $9 billion expansion of the swap programme is "practically closed". This deal will be a significant step in rebuilding Argentina's foreign currency reserves, which are essential for covering trade costs and future debt repayments.

The central bank has struggled to contain a more than 50% slide in the peso and inflation set to rise 40% this year. To address this, the bank has agreed not to intervene in the local spot market unless the peso veers outside of a target band of between 34 and 44 pesos per US dollar.

Argentina's economy minister, Sergio Massa, has stated that the new agreement will give the government and the central bank the necessary foreign currency to inject liquidity into the financial exchange market. This will help prevent prices from skyrocketing again.

The deal is expected to be finalized by the end of May, with Economy Minister Sergio Massa and central bank chief Miguel Pesce set to travel to China from May 29 to June 4.

You might like: Argentina Peso to Gbp

China has put the brakes on a massive currency swap with Argentina, worth $6.5 billion, due to tensions with the new government led by President Javier Milei.

This move is a result of Milei's campaign declarations, where he stated he wouldn't "negotiate" or "do business" with "communists."

The People's Bank of China had made the $6.5 billion available to Argentina as an extension of their currency swap deal in October.

Milei's administration has been slow to send positive signals about the future of bilateral ties with China, which is why the currency swap was put on hold.

Argentina's former economy minister, Sergio Massa, had sought an extension of the currency swap to give the country more firepower to intervene in the foreign exchange market and accelerate the payment of imports.