Although accompanied by the corresponding propaganda from various government social media accounts, the novelty passed almost unnoticed. Nevertheless, it was a crucial announcement with multiple interpretations – one of these is that President Javier Milei government is reactivating the most important public works project in the country; the second, and perhaps the most significant, is that the decision represents the normalisation of the relations between Argentina and China.
The news item in question, published on March 5 by Economy Minister Luis ‘Toto’ Caputo on his X social network account, read as such: “We have agreed to restart work on the Santa Cruz dams, which have been suspended for years due to contractual non-compliance. With this decision we regularise the conditions to restart construction of the Cepernic Dam, which could be completed in 2030 and supply 1,860 GWh to the Sistema Argentino Interconectado grid, boosting the national energy matrix. Complying with our commitments, we continue to normalise the energy sector.”
The first important detail: the dam is named Cepernic as a tribute to late Santa Cruz Province governor Jorge Cepernic, an icon of Kirchnerism, which was obviously the political movement baptising the dam with that name now to be maintained by the libertarians. It remains to be seen if they maintain the name of the second dam: Néstor Kirchner.
The project has the rare characteristic of enjoying 100 percent financing from China via money remitted according to the advance of the work by the China Development Bank Corporation, the Industrial and Commercial Bank of China (ICBC) and the Bank of China. Nevertheless, the work was halted by a domestic political dispute. The official commitment is now to reactivate the works and have the dams on stream by 2030 – it remains to be seen under what name.
This is a project directly linked to the original grant and the subsequent expansion of the programme establishing the massive currency swap between Beijing and Buenos Aires. Indeed the work began with the release of some US$500 million in August 2009. Afterwards came the change of government and ex-president Mauricio Macri’s decision to review the contract with Gezhouba to construct the dams, which remained christened Kirchner-Cepernic.
The first public decision taken by the Macri government was to freeze the works on suspicion of corruption and their negative environmental impact. In those times, the Cambiemos administration had singled out the project as not viable due to the potential extinction of the hooded grebe, a bird whose natural habitat is in the province of Santa Cruz and a species endangered by the environmental impact of the dams, according to the initial denunciation.
Nevertheless, in mid-2016 Beijing reminded Buenos Aires that part of the money on the works had already been spent (and not precisely on advancing them), so that were the project to be lifted, the money would have to be returned. The conditions of the swap were “renegotiated” – the works miraculously came back to life under another name (from now on, they were to be renamed Cóndor Cliff-La Barrancosa), with the currency swap reactivated.
With accelerations and delays, construction work continued during the rest of the Macri and Alberto Fernández governments. In late 2023, Javier Milei came to power and early the following year, he decided that the construction would be suspended until further notice with the residual financing remaining exclusively in the hands of Gezhouba.
The company continued to pay wages and comply with suppliers while beginning the dismissals enforced by the national government’s lack of definition and its refusal to sign Addenda XII, indicating what should be done with the works in each calendar year. The Chinese construction company clarified that they would not be putting in another dollar (or yuan) until that commitment was signed. From December 2023 to September 2024, from around 3,500 workers at their peak, the works ended up employing some 160; by October that had dropped to only around 70, some directors, some managers and security staff remained contracted.
The construction company reminded the government that the financing did not imply money from this country and thus would not swell the fiscal deficit with the necessary dollars being directly negotiated by Gezhouba with their banks.
In late 2024, the last time an advance was registered, the works were 50 percent complete in the case of Cepernic Dam and 30 percent for the Kirchner dam, projects which, if not renewed, ran the danger of succumbing to natural erosion and vandalism.
According to the original project, between them the two dams would generate 10 percent of the total electric energy currently consumed in Argentina. The Gezhouba issue is now directly on the negotiating table, opened up by the Argentine government with Chinese leader Xi Jinping. This chapter had been thought to have been closed, with the dams shelved. Nevertheless, given the pace of the improvement in bilateral relations, along with the certainty that this is the most important chapter between both states (at least from the Chinese perspective), the idea is to reactivate it.
China already knows that to make this possible, they should not wait for public allocations to be earmarked for this project and that the only way of unblocking it and resuming construction is for the money to be supplied in its totality by the Chinese government. They speculate from Buenos Aires that this would not be a bad financial strategy for Beijing, especially in Latin America.
The same mechanism was used in the Peruvian port of Chancay (60 kilometres from Lima), which was inaugurated in 2024 and is controlled by the Chinese state company Cosco Shipping, one of the three biggest port operators in the world. Regarding this project, Donald Trump threatened to collect 60 percent tariffs on all products entering the United States from Chancay – he did not go through with it but neither does the US president maintain a solid relationship with Peru.
Relations between Argentina and China appeared complex due to Milei’s electoral statements and his public condemnation of the Beijing régime. Nevertheless, the Xi Jinping government surprised Argentina in mid-2024 when it accepted renegotiating payments on the country’s swap with Beijing.
That June Argentina should have remitted some US$2.906 billion to the People’s Bank of China (BPC) for the first six payments. The bank’s statutes bar disbursements to countries with loan agreements with the International Monetary Fund (IMF) – for example, its Extended Fund Facility with Argentina – in case they fall into default with any of their partners.
Nevertheless, a conversation between IMF Managing Director Kristalina Georgieva and the Chinese government permitted China to accept renegotiating the debt, passing the payments to next June when in theory Argentina should cancel those instalments. Obviously, with Cepernic inbetween, a new friendly postponement is ruled out.
China has status with 3.65 percent of the IMF votes, making it in recent years one of the shareholders most participating in the meetings of the Board of Directors. If Argentina had not reached agreement over this payment but entered into default – and if, furthermore, China would have denounced it at the meeting of the Board of Directors last June 13 – the Chinese bank’s statutes would have suspended the remittance of US$800 million.
Now it only remains for the country to transfer the money to Beijing in order not to fall into that situation. At the time, Argentina even proposed paying the People’s Bank of China part of the money due with some US$800 million pledged by the IMF, a plan Beijing rejected. Finally, the IMF stepped in with the personal mediation of Gita Gopinath at the direct request of Georgieva with the support of most of the IMF directors from Western countries.
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