China woos an Argentina neglected by American indifference

[sandensea]

China's offer of financial support to Argentina, in the form of a $4 billion currency swap signed today, is the latest example of the Asian nation filling a vacuum in what has traditionally been the "backyard" of the U.S.

While President Donald Trump has not paid a visit to Latin America since taking office, China has stepped up its financial assistance to Argentina and worked to strengthen trade ties.

The two sides agreed today to expand the 70 billion yuan ($10.3 billion) currency swap agreement signed in 2014 by former President Cristina Fernández de Kirchner after a New York judge blocked Argentina's bondholders from collecting payments to pressure the country to pay vulture fund holdouts a 1600% return.

Kirchner's right-wing successor, Mauricio Macri, had condemned the swap, and after taking office in late 2015, suggested that Argentina would distance itself from China.

He then had construction of two hydroelectric power plants and two nuclear power plants cancelled in 2016 - a $20 billion investment 85% financed by China.

But after doubling the nation's current account deficit to $31 billion annually, and its public foreign debt to nearly $200 billion, Macri is finding it harder to turn down offers from the Asian economic power.

The 2014 currency swap was renewed for three years in 2017, and amid over $20 billion in capital flight so far this year - triggered by growing default fears among investors - it's widely believed that China itself proposed the $4 billion expansion.

Argentina's foreign exchange reserves have declined as the Central Bank sells dollars to prop up the peso - which nevertheless fell from 20 to the dollar as recently as April, to 30 currently.

Current reserves of $54 billion include $4 billion borrowed in May from lenders of last resort such as the Bank for International Settlements and the vulture fund BlackRock, as well as $15 billion from the IMF on July 22 - a loan conditioned on severe budget cuts.

China is already Argentina's second-largest trading partner. But the record $7.7 billion deficit with China made up 90% of its merchandise trade deficit last year. The currency swaps have helped finance this shortfall.

China also appears interested on including Argentina in its Belt and Road infrastructure initiative - as well as forging a free trade agreement with the Mercosur trade bloc that also includes Brazil.

At: https://asia.nikkei.com/Politics/International-Relations/China-woos-an-Argentina-neglected-by-American-indifference

After you: Once given to cancelling Chinese infrastructure projects in Argentina by high-handed decrees, Mauricio Macri has recently sought closer ties with China's Xi Jinping after his own deregulatory policies plunged the country into its most severe crisis since 2002.

[Judi Lynn]

1. How can Macri's supporters justify Macri's actions? Where did the money go for the 4 power plants

he cancelled after Christina obtained the money from China to finance them? I don't imagine Macri wants to acknowledge what happened to that funding.

The need for expanded power resources still exists, too, of course. I guess they'll leave it alone in case the sane people recover the Presidency, then that President will start off with a horrendous handicap on top of the wreckage he has made of the government already.

The Americas must seem very interesting, and odd to China these days. So much astounding greed governing the largest countries in the West, with the exception of Canada, with the politicians grabbing as much as fast as they can, and handing off the leftovers to their cronies, while the masses grow more and more desperate.

At some point it seems these lunatic Presidents would start being ashamed to be seen in public, after creating so much chaos, and suffering.

It does remain interesting, as we watch in amazement.

Thank you, sandensea for the new information.