Argentina eyes tapping China swap to cover 2027 financing needs

Argentina could tap its currency swap line with China if it can’t refinance dollar-denominated bonds under local law as investor concerns simmer ahead of next year’s presidential election, Economy Minister Luis Caputo said. 

Caputo met privately with investors at an event hosted by JPMorgan Chase & Co on the sidelines of the International Monetary Fund and World Bank meetings in Bangkok. Afterward, he noted “there was a lot of focus on the political aspect” ahead of President Javier Milei’s re-election bid next year. 

“They also asked about the financial programme for 2027, in the eventual case that the Bonares refinancing isn’t possible,” Caputo said in an interview Wednesday after the investor meeting. “We explained that in that case we could use the China swap.”

In July, Milei’s government announced it would issue US$5 billion in 2027 of the notes known locally as Bonares as part of its US$25-billion financing package for next year. But that plan faces fresh doubts since Caputo paused Bonar issuance in mid-August amid high US Treasury yields. Until then, the bonds had provided Milei’s government with much-needed hard currency in the absence of a return to international capital markets, which the libertarian leader has avoided so far. 

The potential financing gap and broader concerns about Milei’s looming re-election bid have elevated Argentina’s sovereign risk to 600 basis points, up from a low of 410 in early July, and diminished the odds of a return to markets in the near term. 

Caputo clarified that Argentina’s separate US$20-billion swap line with the United States also remains an option next year to calm market volatility ahead of the election, though he didn’t refer to it as a tool to specifically cover the possible financing gap from Bonar bonds. 

Argentina’s monetary authority renewed its US$19-billion swap line with China’s central bank in August for another five years, including an “activated” portion of that swap that totals US$5 billion, which would mirror the amount of Bonar bonds the government expected to issue. 

In Bangkok, Caputo met separately with IMF Managing Director Kristalina Georgieva and World Bank President Ajay Banga, with both multilateral leaders praising Argentina’s economic policies. The World Bank is analysing the possibility of expanding the funds available for the country. 

Caputo also addressed outstanding claims related to warrants linked to Argentina’s gross domestic product, telling investors that resolving legacy claims is something the government intends to do in due time. In previous investor meetings, he had typically declined to comment on the issue.

“It takes time,” he said, pointing to the government’s track record of honouring its obligations to bondholders.