Currency swap deal boon for Argentina

Argentina's renewal of a $5 billion currency swap with China, despite opposition from the United States, has given a boost to the country's economic recovery and underscored a financial partnership that continues to "expand out of necessity", analysts say.

The April 10 extension spares Argentina from repaying $5 billion to China this year — a critical relief as it grapples with a severe dollar shortage and persistent inflation. The deal came just a day before the International Monetary Fund approved a new $20 billion bailout package for Argentina.

The currency arrangement, in place since 2009, highlights Beijing's growing economic ties with Buenos Aires, said Alejandro Marco del Pont, an Argentine economist and international relations expert.

"China is investing in railway transportation, hydroelectric dams and the Atucha III nuclear plant — a joint Chinese-Argentine project," he said. "Their interest in the Strait of Magellan for future maritime logistics between the Atlantic and Pacific is another US concern."

In 2023, China was Argentina's second-largest trading partner after Brazil, leading in purchases of key Argentine exports such as soybean, meat and lithium.

The US has strongly opposed Argentina's currency swap deal with China. Mauricio Claver-Carone, the State Department's special envoy for Latin America, threatened to withhold IMF support unless Argentina distanced itself from China.

Argentine President Javier Milei had previously moved to "cool "down its relationship with China, said Sebastian Schulz, a sociologist and expert in Chinese studies at the National University of La Plata.

Practical considerations

However, practical economic considerations have maintained bilateral trade ties on a solid footing. Marco del Pont said Argentina's economic relationship with China continues to "expand out of necessity".

Schulz agreed, saying that trade flows, mining investments and financial cooperation — including the currency swap — remain active. "The relationship with China remains structurally important to Argentina's economy," he said.

Argentina's economic crisis has reinforced its need for Chinese financial support. The currency swap deal has evolved into an important lifeline for the country's economy.

"It enables foreign trade without straining official dollar reserves, potentially limiting price increases in key sectors," Schulz said. "It also helps stabilize the economy by boosting central bank reserves — and notably, China imposes no conditions on Argentina's economic policies."

Marco del Pont said the deal helps Argentina manage immediate currency pressures, curb inflation on imports and secure essential imports such as machinery from China.

However, it remains a stopgap measure rather than a solution to Argentina's fundamental economic problems, he added.

"It offers temporary liquidity but doesn't address Argentina's structural problems — the lack of market confidence and the underlying dollar shortage — even in the context of the IMF program framework."

The writer is a freelance journalist for China Daily.