BUENOS AIRES: Central Bank chief will meet Beijing counterparts in Lima, says country’s Ambassador
Central Bank Governor Alejandro Vanoli will travel to Lima, Peru over the next few days to meet with representatives of China’s Central Bank in hopes of negotiating a renewal of the current US$11-billion currency swap deal, which has been almost completely used up, Chinese Ambassador in Argentina Yang Wanming said.
“We sealed a currency swap agreement last year which was well implemented and now it has almost been completely used up,” China’s Ambassador to Buenos Aires, Yang Wanming, told the Noticias Argentinas news agency.
“Argentina wants to broaden this agreement,” the Ambassador added. “We are currently reviewing the request as we give a lot of importance to financial cooperation with Argentina. I hope the deal can be signed in the future.”
Vanoli will travel to Lima to represent Argentina at the annual meeting of the World Bank Group and the International Monetary Fund, which will be held between October 5 and 12. The trip was confirmed to the Herald by Central Bank sources, who said they “don’t rule out” a meeting with Chinese Central Bank officials but refused to comment on the objective to extend the currency swap.
Despite the refusal, Yang said the meeting in Lima for the extension of the swap “has already been scheduled,” confirming also that President Cristina Fernández de Kirchner and her Chinese counterpart Xi Jinping discussed the issue when they met in New York on the sidelines of the UN General Assembly.
“Vanoli will travel to Lima in the very near future because the meeting with Chinese Central Bank authorities to move forward with this agreement has already been confirmed. The two monetary authorities have a fluid relationship,” the Ambassador added said.
Vanoli had already reportedly held preliminary meetings in Buenos Aires before the summit in Lima.
La Nación daily had reported Central Bank officials travelled to New York last week to try to reach an agreement over a new debt swap. Government officials have not confirmed that the meetings took place.
The Central Bank signed the US$11-billion currency swap operation last year, which was initially supposed to last three years and allow Argentina to pay Chinese imports with the yuan currency. Through the deal, the government was able to stabilize the foreign-currency reserves, which had been on the decline.
The yuan today can be freely converted into US dollars, euros or other currencies in Hong Kong, London or Singapore and, because of that, various central banks have decided to convert parts of their reserves into yuans, including Indonesia,the United Kingdom, Brazil, Singapore, Ukraine, Australia, Turkey, the United Arab Emirates, Hong Kong, South Korea and New Zealand.
Argentina had signed a similar deal with China in 2009 which ended three years later without being used. The agreement was for 70 billion yuans or 38 billion pesos, a lower figure, and had more limitations regarding uses of the funds and deadlines.
Pressure on reserves
The need for dollars comes as the Central Bank’s foreign-currency reserves will be under pressure due to debt payments. Up to US$5.8 billion will be used to pay for the Boden 2015 bond, which matures on Saturday, followed then by US$223 million on October 17 for interests on the Bonar 2017, US$142 million on November 7 to service the Bonar 2024 and US$151 million on November 29 for the Bonar 18.
Reserves dropped US$30 million yesterday and closed at US$33.281 billion, accumulating a US$320-million drop so far this month with only one business day to go before the end of the month. The monetary authority sold US$100 million, accumulating US$1.6 billion sold this month to avoid a larger devaluation.
“Argentina is an important partner not only on trade but also on politics. We share common interests on international issues such as in the G20, where we work together on sovereign debt restructuring and the need to reform the United Nations Security Council,” Yang said at a summit yesterday.
Growing relation
A renewal of the swap would be a strong sign of the budding commercial relationship between Buenos Aires and Beijing at a time when Argentina has been locked out of international credit markets due to the legal conflict with the “vulture” funds.
Ties between Argentina and the East Asian giant have been deepening, with President Cristina Fernández de Kirchner visiting China in February and her counterpart Xi Jinping visiting Argentina last year. Thanks to both trips, significant Chinese investments were confirmed in hydroelectric and nuclear energy, plus railway and maritime infrastructure.
Regionally speaking, trade between China and Latin America saw a whopping 1,200-percent increase between 2000 and 2009, a trend that has continued since then.
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