China overlooks Milei’s rhetoric, hands Argentina US$35 billion lifeline

Weeks of market turbulence ends as crucial currency swap renewal is agreed, giving Buenos Aires economy room to breathe

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Argentina’s central bank says the agreement with China is necessary to manage balance of payment flows. Photo: Reuters

Published: 9:51am, 13 Jun 2024Updated: 1:29am, 15 Jun 2024

China has agreed to renew currency swap tranches worth 35 billion yuan (about US$5 billion) with Argentina’s central bank until July 2026, the South American country’s monetary authorities announced on Wednesday.

According to a statement from the Central Bank of Argentina, the institution will gradually reduce the activated value of the swap over this period, with the aim of deactivating it completely by the end of the contract.

The authorities emphasised that the agreement – originally signed in 2020 and activated last year – is crucial for managing the balance of payments flows at a critical time.

China first signed a renminbi-based swap agreement with Argentina in 2009 and has since expanded the arrangements on at least three occasions.

When Beijing agreed to activate the swap in 2023, Argentina was facing a severe dollar shortage exacerbated by a devastating drought that severely affected soya plantations and caused exports to fall to their lowest level in 20 years.

Argentina’s President Javier Milei. Photo: Reuters

However, there was uncertainty about whether China would authorise another renewal because of the contentious relationship between the two countries since the self-described “radical libertarian” Javier Milei took office as president in December.