© Reuters. FILE PHOTO: An Argentine one hundred peso coin is shown in this pictogram taken September 3, 2019. REUTERS/Agotin Markarian/Illustration
by Walter Bianchi
Argentina is in talks to renew and possibly expand a currency swap line with China, a central bank source said on Wednesday, as the South American country grapples with dwindling foreign reserves that threaten its ability to meet payments.
The country has free access to about $5 billion as part of a Chinese currency swap agreement worth a total of 130 billion yuan ($18.81 billion). The two countries activated the usable portion in January to help strengthen the beleaguered Argentine peso.
The government source said the central bank was “progressing towards renewing the swap and discussing the possibility of increasing the unrestricted amount” with the aim of having an agreement ready for signing by the end of May.
“The idea is to have everything sealed for travel and signing at the end of the month,” the source added. Economy Minister Sergio Massa and Central Bank President Miguel Pesci are expected to travel to China from May 29 to June 4.
A source at the Ministry of Economy, when asked about the exchange agreement, said there might be news about the trip, but did not give details.
Argentina must rebuild its reserves to cover trade costs and debt repayments in the future, as well as to achieve economic goals under its $44 billion loan program with the International Monetary Fund (IMF), which it is currently trying to renew.
China has been promoting the international use of the yuan currency as a competitor to the US dollar, and has gained a foothold in South America where it is the largest trading partner for many regional economies.
In April, Argentina said it would start paying for Chinese imports in yuan instead of dollars, a measure also intended to relieve the country’s dwindling dollar reserves.
Argentina’s foreign exchange reserves have fallen sharply this year as major droughts hit cash crop exports, corn and soybeans and the peso weakens, pressured by 109% annual inflation and political uncertainty ahead of elections in October.
($1 = 6.9121 renminbi)
