Argentina renewed a portion of its US$18-billion currency swap line with China, just days before US Treasury Secretary Scott Bessent visits the nation to meet President Javier Milei.
The activated part being extended for another 12 months amounts to US$5 billion, according to a statement Thursday from Argentina’s Central Bank. In 2023, Milei’s predecessors tapped a portion of the swap amid a growing economic crisis to pay down debts and imports, meaning China’s monetary authority must choose to renew the financing line.
The timing is crucial as Latin America has become a battleground for influence between the US and China, especially in Argentina.
Before Bessent’s arrival Monday in Buenos Aires, the International Monetary Fund’s executive board is scheduled to vote Friday on a new US$20-billion programme for the crisis-prone nation, which would be a major sign of support from President Donald Trump’s administration since the US is the largest stakeholder at the IMF.
News of the high-level visit was well-received by some on Wall Street, stirring speculation that it could portend additional support from Trump’s team.
“This sends a signal that agreements will keep coming, that they’ll be good, that the IMF will approve without any issues a programme that the market is interpreting as good for Argentina,” Ernesto Revilla, head of Latin America Economics at Citigroup, told reporters on a conference call.
Beyond an escalating and volatile trade war that’s rattled global markets in recent weeks, US and Chinese officials have traded barbs over the swap line.
Mauricio Claver-Carone, the administration’s special envoy to Latin America, called the financial lifeline extortionary and said he wanted it to end. China’s Foreign Ministry hit back, calling on the US to “get its perspective right” and saying it “makes more tangible contributions to the development of Latin American and Caribbean countries.”
The growing rift between the world’s two largest economies has put Milei in a bind since he’s outspokenly pro-US. After lashing out at the communist government in Beijing during his election campaign, the libertarian leader has softened his stance in office, calling China a great trading partner.
Local media reported earlier Thursday, citing unnamed sources, that the US government is exploring whether to extend a credit line to the Milei administration as part of a broader package to bolster Argentina’s hard-currency reserves. A spokesperson for the US Treasury department declined to comment.
“Until there is certainty that there is a US line, which may have to go through Congress, it’s in Argentina’s best interest to keep all financing options open,” Ramiro Blázquez, a Buenos Aires-based strategist at trading firm StoneX Securities, said by text message. “But if there is US funding, Argentina should go that route because the conditions would be better than those available from China.”
Created in 2009, the swap agreement means that the People’s Bank of China has an account in yuan at Argentina’s Central Bank, and the latter has an account in pesos in China.
by Patrick Gillespie, Kevin Simauchi & Manuela Tobias, Bloomberg
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