Argentina renews US$19-billion China swap for another five years

Argentina secured a key source of reserves through the 2027 presidential election after the Central Bank renewed its roughly US$19-billion currency swap with the People’s Bank of China for five years.

The renewal covers the entire swap line and the activated portion that Argentina has been using since 2023 remains at about US$5 billion, the monetary authority said in a statement Wednesday. The duration of the new deal has been extended by two years.

“This agreement strengthens the close cooperation between the two institutions and the excellent relationship they have maintained over the 17 years since the first agreement was signed in 2009,” the bank said.

Central Bank Governor Santiago Bausili met with PBOC Governor Pan Gongsheng during a June symposium hosted by the Bank for International Settlements in Shanghai. Ahead of the meeting, Bausili signalled the two sides were engaged in discussions to renew their swap under the same conditions as in the past.

“We’re talking with them to extend it, as always,” Bausili said at a May press conference in Buenos Aires. “This continues to be stable and quasi-permanent.”

Milei’s leftist predecessor activated a portion of the swap line in 2023 to make payments owed to the International Monetary Fund and finance imports ahead of the election. Milei has already paid down the vast majority of those US$5 billion, with only about US$680 million remaining, according the latest Central Bank figures.

Geopolitical strains between the Unied States and China at one point cast doubt on the renewal of the swap line, especially after a Trump administration official said it was an extortionary arrangement that should come to an end. While US Treasury Secretary Scott Bessent said Milei was “committed to getting China out of Argentina” after throwing him a US$20-billion lifeline last year, he never specified the swap should come to an end. Bessent did, however, say Milei’s economic reforms should give Argentina enough foreign exchange inflows to pay off the active US$5-billion portion.

Economy Minister Luis Caputo, alongside Foreign Minister Pablo Quirno, are expected to travel to China soon after the two countries settle trade talks ahead of a separate trip by Milei, Quirno said in a recent radio interview. 

Milei faces a re-election bid in late 2027, at the same time as the country must pay more than US$25 billion in debt maturities. Election years in Argentina have historically strained the Central Bank as demand for dollars surges.