Asma Khalid

Opinion | Why China should reassess its strategy in Argentina and Latin America

No rational Argentinian politician would risk China’s substantial investments but US offers of free trade to Latin America and steelmaker complaints about cheap Chinese imports threaten to turn the tide

Reading Time:4 minutes

Why you can trust SCMP

Argentina’s Foreign Minister Diana Mondino meets her Chinese counterpart Wang Yi, in Beijing on April 30. Photo: Xinhua

Asma Khalid

Published: 4:30pm, 1 May 2024Updated: 5:54pm, 1 May 2024

Argentina’s Foreign Minister Diana Mondino and finance officials visited China this week amid an urgent need to renew their US$6.5 billion currency swap agreement. These swaps were frozen by China last December after the election of President Javier Milei, who labelled the government in Beijing “assassins” during his election campaign and has vowed to pivot towards the US.

Milei has since moderated his stance, recognising the economic challenges facing Argentina. With dwindling foreign exchange reserves and the looming threat of a 10th sovereign debt default, the administration is under pressure. The International Monetary Fund is conducting its eighth review, with the release of US$800 million in loans contingent on improvements in Argentina’s fiscal and forex situation.

Including the frozen US$6.5 billion swap line, Argentina has US$18 billion agreed in currency swaps from China for this purpose. Last year, US$5 billion of this was used to cover imports but this is set to expire in June.

Argentinian finance officials urgently seek three things from Beijing: a pushing back of the expiry of the US$5 billion in swaps, a renewal of the suspended US$6.5 billion swap line, and more Chinese investment as crucial projects like the Chinese hydroelectric project in Santa Cruz face funding shortages. China’s financial help is pivotal to Argentina’s economic stabilisation.

But, to Beijing, this financial outreach is at odds with Milei’s display of opposition to China politically, diplomatically, economically and on security issues.

Milei reversed Argentina’s stance on Brics membership by declining the invitation last December. The bloc, comprising Brazil, Russia, India, China and South Africa, had invited Argentina and five others – Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates – to become members from January this year.