MercoPress. South Atlantic News Agency

New currency swap with China gives Argentina some financial relief

During the meeting, the Argentine delegation gave their Chinese interlocutors official jerseys of the Argentine national football team

Argentina will have US$ 10 billion to play on the domestic foreign exchange market and avoid a steeper devaluation of the peso after renewing a currency swap with China, Economy Minister Sergio Massa announced in Beijing Friday.

The agreement was finalized during a visit by Massa and Argentine Central Bank (BCRA) Miguel Pesce to the headquarters of the People's Bank of China (PBoC) where they met with local executive Yi Gang.

Argentina agreed with China the renewal for three years of the currency swap for 130 billion yuan (US$ 19 billion), with free availability of US$ 10 billion, according to the BCRA. The extension of the currency agreement with the PBoC provides for an increase of US$ 5 billion in freely available funds in addition to another 5 billion available since the 2020 agreement.

The agreement will basically make it possible for the BCRA to hold on to its reserves in US dollars for other purposes than trading with China.

“That leaves more freedom of movement to the Central Bank, because it allows it to stop spending dollars in foreign trade,” a BCRA source was quoted as saying.

”One of the things they (the authorities of the People's Bank of China) most appreciated is that the use of yuan has been privileged for the bilateral relationship. Besides, with the level of trade deficit we have with China, it is not our idea to exchange them for dollars,“ the source added.

”The rate is lower than that of the IMF, the CAF (Andean Development Corporation), the IDB, and the World Bank. It is a significantly lower rate,” it went on.

However, one of the conditions for the swap agreement was that Argentina keeps complying with the International Monetary Fund (IMF), it was explained. An Argentine delegation is due in Washington shortly for further discussions.

Massa admitted that some of the Chinese investments in the South American country will be implemented in 2024 with a new Government: “These issues, whoever governs, are for the benefit of Argentina and they must serve the economic development of Argentina, the best quality of life and the dreams of Argentines. We do not care who will govern in 2024. We understand that they help Argentina.”

During the meeting, the Argentine delegation gave their Chinese interlocutors official jerseys of the Argentine national football team and made arrangements for them to attend the friendly match Argentina will play against Australia at the Beijing Workers' Stadium on July 15.