China, Argentina agree US$7.5b loan
Print Edition
CHINA on Friday agreed to lend Argentina US$7.5 billion on the first day of President Xi Jinping’s visit to the Latin American country.
The largest single deal agreed by Xi and Argentine President Cristina Fernandez de Kirchner was a US$4.7 billion loan from China Development Bank for the construction of two hydroelectric dams in Patagonia. China Gezhouba Group Corp and Argentina’s Electroingenieria won contracts last year to build the dams, which will have a combined generating capacity of 1,740 megawatts.
The bank also agreed a US$2.1 billion loan to help finance a long-delayed railway project that will transport grain from Argentina’s agricultural plains to its ports.
“It’s a day we can define as foundational in the relations between our two countries,” Fernandez said after signing the deals.
China is Argentina’s second-largest trading partner after neighbor Brazil. Argentina is the world’s third-largest exporter of soy and corn. China is the main buyer of its soybeans.
Xi arrived in Buenos Aires after attending the BRICS (Brazil, Russia, India, China and South Africa) summit in Brazil.
The two leaders also agreed a three-year, US$11 billion currency swap between their central banks that will enable Argentina to pay for its Chinese imports in yuan. Argentina signed a similar deal with China in 2009.
Fernandez’s government has imposed stringent import and capital controls to safeguard dwindling foreign reserves, which it needs to pay its debts.
It has been virtually shut out of global credit markets since staging a massive 2002 default.
Hopes that Argentina be allowed to access markets again soon hinge on it reaching a deal with holdout creditors who rejected its debt restructuring in 2005 and 2010.
Fernandez said the deal with China could offer “stability in exchange rates at the moment we are, as a country, suffering speculative attacks by vulture funds.”
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