BUENOS AIRES: The governor of the central bank of Argentina, Alejandro Vanoli, is flying to Lima to strike a new deal with the Central Bank of the People’s Republic of China on the fringe of the World Bank/IMF meetings to boost its dwindling international reserves.
Negotiations have been underway in recent weeks to increase a foreign swap agreement and are due to be concluded in the Peruvian capital, according to a central bank source.
China’s renewed effort to bolster Argentina on the eve of the presidential election comes after Beijing has agreed to sign new loans and financing deals with other troubled South American countries in spite of its own domestic issues, including the recent devaluation of the yuan and uncertainties regarding its amount of debt.
Argentina will elect Cristina Fernandez de Kirchner’s successor later this month. “The government’s strategy to stabilise the economy ahead of the elections is under strain,” said Martin Castellano, a senior economist at the Latin America department of the International Institute of Finance (IIF). “The central bank is relying heavily on a currency swap from China.”
Last month, China extended a fresh $5bn loan to Venezuela to increase its oil production. In return, Chinese companies have been hired to help reach output targets.
In August, the Chinese Eximbank said it would open new credit lines worth some $10bn in Latin America in spite of the financial market turmoil. The latest three year $11bn swap agreement between China and Argentina was only signed last year, but it has already been used almost entirely.
In nominal terms, Argentina’s official reserves amount to $32.5bn. “But that seemingly comfortable figure is misleading, masking deep cracks in the model. Once you adjust for unpaid imports, debt payments, the Chinese swaps and other items, Argentina’s reserve position could be as low as $10bn-$12bn — and possibly closer to zero,” said Fernando Sedano, a Morgan Stanley economist, in a recent report.
Pakistani olive oil brand wins gold medal at London competition
LONDON: A Pakistani premium olive oil brand has brought international recognition to the country after winning a gold medal at...
