Monday 23 September 2019

Four ways China emerges as a major economic driver in Argentina (posing a challenge to Donald Trump)

Argentina hosts Trump, Chinese President Xi Jinping and other leaders of G20 nations this week

(L-R)US First Lady Melania Trump, US President Donald Trump, Argentina's President Mauricio Macri, and Argentina's First Lady Juliana Awada pose outside the West Wing of the White House April 27, 2017 in Washington, DC. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images
(L-R)US First Lady Melania Trump, US President Donald Trump, Argentina's President Mauricio Macri, and Argentina's First Lady Juliana Awada pose outside the West Wing of the White House April 27, 2017 in Washington, DC. / AFP PHOTO / Brendan SmialowskiBRENDAN SMIALOWSKI/AFP/Getty Images

Cassandra Garrison

China is forging closer economic ties with Argentina, posing a challenge to President Donald Trump, who views Argentine President Mauricio Macri as a key regional ally.

As Argentina hosts Trump, Chinese President Xi Jinping and other leaders of G20 industrialised nations this week, its reliance on China as a customer for its commodities and a major lender to its troubled economy has never been greater.

Here are four ways China has emerged as an economic force in Argentina:

CHEAP FINANCING

In the last 10 years, China has established itself as one of Argentina's biggest lenders, financing a total of about $18.2bn in projects, mainly infrastructure, with interest rates typically between 3pc and 4pc, according to the Inter-American Dialogue, an organization that tracks Chinese state lending to Latin America.

Argentina and Brazil accounted for 91pc of total Chinese lending to Latin America in 2017.

INVESTMENT IN INFRASTRUCTURE

This year is on track to see the most investment by China in Argentina since Macri took office in 2015, totaling at least $1.9bn, according to Argentine government data reviewed by Reuters. Since 2015, China has spent $3.6bn, most of it on transportation and infrastructure projects, says Argentina's investment and international trade agency.

CURRENCY SWAP

The financial ties extend to a currency swap between China and Argentina. The two countries are expected to seal a deal this weekend to expand the credit line to nearly $19bn. Once signed, it will make China the biggest non-institutional lender to Argentina. The swap comes at a time Argentina is looking to boost its reserves and balance its budget.

MAJOR TRADING PARTNER

Argentine exports to China, its second-biggest trading partner, have nearly quadrupled since 2001, driven by soybeans, its biggest cash crop, as China aims to secure the food supply for its population of 1.4 billion. Argentina's exports to China are growing at a much faster rate than to its other main trading partners, Brazil and the United States, data reviewed by Reuters shows.

Argentina recorded its biggest trade deficit with China in its history last year at $7.7bn, surpassed only by its deficit with Brazil, which was $8.6bn in 2017.

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