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ECONOMY | 19-12-2023 18:09

China puts brake on Argentina's US$6.5-billion currency swap amid Milei tensions

Chinese government puts brake on massive currency swap negotiated by former president Alberto Fernández; Beijing awaiting firm signals from Javier Milei’s administration, who stated during campaign that we would not “negotiate with communists."

China’s government has frozen a US$6.5-billion reinforcement of its currency swap with Argentina agreed in October with former president Alberto Fernández amid tensions over the relationship with new head of state Javier Milei.

Sources from Argentina’s previous government confirmed a report by US agency REDD Intelligence reporting that the extension of an existing currency swap had been put on hold while Beijing awaits positive signals from Milei’s administration about the future of bilateral ties.

“It was halted while awaiting fraternity gestures” unnamed sources said to Perfil, confirming the version of events reported by REDD Intelligence.

The People's Bank of China made US$6.5 billion available to Argentina as an extension of the currency swap deal the two countries share on October 10 earlier this year. 

Then-president Fernández said at the time his government had originally requested US$5 billion but that his Chinese counterpart, Xi Jinping, had granted an additional US$1.5 billion after talks in Beijing.

Former economy minister Sergio Massa, who lost the December presidential run-off to Milei,  sought an extension to give Argentina more firepower to intervene in the foreign exchange market and accelerate the payment of imports. A portion was even used to face a maturity from the nation’s US$44.5-billion credit programme with the International Monetary Fund (IMF).

Government sources said that last week Milei sent Xi a formal request asking to unlock the exchange of foreign currency.

 

Consequences?

Beijing’s new stance is likely a result of campaign declarations Milei delivered on the campaign trail. A strident critic of the Chinese government, the libertarian leader stated on multiple occasions that he would not “negotiate” or “do business” with “communists.”

Since taking office, Milei has also U-turned on Fernández’s plan to take Argentina into the BRICS bloc of nations, rejecting the formal invitation.

However, Argentina’s new president received a note of congratulations from Xi after his election victory and the libertarian has since refrained from voicing further criticism.

“I thank President Xi Jinping for his vote of confidence and for once again providing us with such important aid which will be a great relief for all Argentines,” said Milei in a social media post after his inauguration. 

Soon after his inauguration, Milei met with a top envoy from the Chinese government – talks that were not publicised by the Casa Rosada but were revealed via a post on social media from a Chinese official who attended the meeting.

“Both countries are strategic partners and our bilateral relationships are in good shape,” stated Mao Ning, a spokesperson from the Chinese Foreign office, after the meeting between Xi’s envoy and Milei.

“China values the growth of its relations with Argentina from a strategic and long-term perspective. We’re willing to work with Argentina’s new government for the sustained and stable development of the comprehensive China-Argentina strategic association,” she said.

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