China Breaks 6.5 Billion USD Currency Swap Deal with Argentina

China has halted a currency swap deal worth $6.5 billion with Argentina. This decision comes just 10 days into the term of Argentine President Javier Milei, who had campaigned vehemently against China and advocated for severing ties.

On the 21st, the South China Morning Post (SCMP) quoted local Argentine media reports, stating “China has suspended a $6.5 billion currency swap deal,” and predicted that “China will halt the currency swap deal until President Milei clearly expresses his willingness to cooperate with China.”

The SCMP reported that the Chinese Embassy in Argentina did not respond to inquiries about the truth of the matter. Wang Wenbin, a spokesperson for the Chinese Ministry of Foreign Affairs, also did not confirm the facts during a briefing the day before, only stating, “China will cooperate with Argentina based on equality and mutual benefit.”

The two countries have renewed their currency swap deal every year since 2009. For Argentina, which is not only in a dollar deficit but also in a state akin to international default, the currency swap with China has been seen as one of the few credit options among South American countries.

In October last year, China promised to extend the currency swap with Sergio Massa, who was then Argentina’s Minister of Economy. However, Massa lost to Milei by 11.3 points in the election last month. During his campaign, Milei consistently voiced anti-China and anti-communist sentiments, stating, “We will not trade with communist countries, and therefore we will sever ties with China,” and “We will trade with civilized places.” However, after his election, he reportedly changed his stance and sent a letter to the Chinese government requesting a renewal of the $5 billion currency swap.

According to Argentine media outlet Infobae, China’s suspension of the currency swap is speculated to have been influenced by Argentina’s purchase of used F-16 fighter jets from the United States. Before Milei’s election, Argentina was reportedly in negotiations to purchase Chinese jet fighters (JF-17 Thunder). Infobae predicted that Argentina would need to demonstrate ‘clear goodwill or a friendly attitude’ to resume the currency swap with China.

Argentina is now in a situation where it has to seek funding sources through debt renegotiation with the International Monetary Fund (IMF), but the SCMP predicted that it would be difficult without the ‘buffer’ of a currency swap with China.

By. Hyun Jung Kim