Argentina Repays IMF Loan In Chinese RMB Yuan
Bilateral trade soaring while Peso plummets in value
The emergence of the Chinese Yuan as a developing global alternative currency took a step forward last week with the Argentinian Central Bank making a loan repayment valued at US$1 billion to the International Monetary Fund in Chinese RMB Yuan (¥ 7,200,300,000). A further US$1.7 billion was disbursed in ‘Special Drawing Rights’ which are considered to be the IMF’s currency as it is a reserve asset made up of a basket of the world’s main currencies.
This is the first time that Argentina has used freely available Yuan from its currency exchange with China to pay an external international organization. This money was intended to finance imports from China, however officials had already anticipated that it could be put to other uses.
Sergio Massa, of Argentina’s Economic Ministry, stated that “The payment of the June maturities was made without using US Dollars but instead by using SDRs [special drawing rights] and Yuan.” The IMF confirmed the transaction. The international organization accepted Yuan as payment while negotiations to restructure Argentina’s debt continue.
The Argentine team has asked to reformulate goals agreed with the IMF in 2022 given the impossibility of meeting them due to the impact of the worst drought the country has seen in decades. The countryside is the nation’s main economic engine and losses due to the lack of rain are running into US$20 billion.
The Argentinian Peso, has dropped 44% against the US dollar over the past twelve months while inflation has reached levels of up to 70%. Washington has declined to intervene despite it being the countries third largest export market, as a depleted Peso makes its imports from Argentina less expensive.
The IMF negotiations are also taking place in the middle of an Argentinian election campaign, with Massa in a double role of being the Minister of Economy and a candidate for President. The country will hold primary elections on August 13 and general elections on October 22.
China has been active in helping Argentina through its economic and currency crisis. The Central banks of China and Argentina recently renewed their bilateral currency swap agreement, for ¥130 billion (Pesos 4.5 trillion, or US$$18.2 billion) with the agreement valid for three years, according to the People’s Bank of China in early June.
Bilateral trade is also increasing. In 2022, Argentina’s imports from China exceeded its exports by nearly US$10 billion, reaching a record high of US$17.5 billion. Argentinian exports amounted to nearly US$8 billion. In comparison to 2021, exports from Argentina to China increased by over US$1 billion.
The main products that China exports to Argentina are Computers, Broadcasting Equipment, and Organo-Inorganic Compounds. The main products that Argentina exports to China are Soybeans, Frozen Bovine Meat, and Sorghum. Argentina joined the Belt & Road Initiative in early 2022.