Argentina has announced that it will start using the Chinese yuan to pay for certain imports from China. The agreement, which is aimed at safeguarding Argentina’s dwindling dollar reserves, will see the disbursement of more than $1 billion in April. The move is seen as a positive pact for both nations, as China deepens the penetration and usage of the yuan in Latin America, and Argentina leverages $5 billion of the “swap” reserve that was approved between Argentine President Alfredo Fernandez and Chinese President Xi Jinping. China is currently Argentina’s international partner, and this move will ostensibly allow the country to lessen the weight of imports on the weakened state of Argentine reserves.
The concession given to Argentina by Chinese President Xi Jinping allows the central bank to focus its attention on the devaluation and inflation spiral Argentina is currently experiencing by injecting resources to stabilize its fiat exchange rate, which reached record lows last week against the U.S. dollar. Argentine Economy Minister Sergio Massa also stated that using the Chinese yuan will serve to disarm a corruption scheme that justified using Uruguay as a bridge for the payment of Chinese imported goods in dollars. In this regard, he stated: “This swap in the guarantee of continuing to produce with intermediate goods from China, avoiding the triangulation detected — which was somehow used to pay more for what Argentina imported, than what (the intermediary) bought cheaper.”
Just for April, there are already $1.07 billion in imports that will be settled with the Chinese yuan, and $0.8 billion are already set to be paid in the same way in May. The measure generated mostly positive reactions from the main Small and Medium Enterprise (SME) associations according to Argentine news agency Telam. Leo Bilanski, president of ENAC, one of these organizations, said operating using the Chinese yuan presented several advantages. He explained: “Being able to operate in the national currency of both countries makes trade transparent and boosts, for SMEs, foreign trade operations within a framework of dollar restrictions and financial speculation with the illegal dollar.”
The move by Argentina is seen as a significant step towards the internationalization of the Chinese yuan. As the currency continues to gain traction in Latin America, it is likely to become more widely accepted as a means of payment for international transactions. This could have far-reaching implications for the global economy, as the yuan is likely to become an increasingly important currency in the years to come. It remains to be seen how other countries will react to Argentina’s move, and whether they will follow suit in using the yuan for international transactions.
Overall, the move by Argentina to use the Chinese yuan for certain imports is a positive development for both nations. It allows Argentina to safeguard its dwindling dollar reserves while deepening its economic ties with China, and it helps to further internationalize the yuan, making it a more widely accepted currency for international transactions. As the global economy continues to evolve, it is likely that we will see more countries adopting the yuan as a means of payment, and this could have significant implications for the future of international trade and finance.