China and the IMF Advance Negotiations on Argentina’s Debt
The International Monetary Fund (IMF) expects China to agree to reschedule payments on a portion of the $18 billion swap line granted to Argentina. This step is crucial to free up cash amidst significant budget cuts by Argentine President Javier Milei and to maintain the IMF’s robust fiscal support program for the country, as reported by Bloomberg.
Argentina is scheduled to pay around $2.9 billion to the People’s Bank of China this month and another $1.9 billion in July, according to data from the Central Bank of the Argentine Republic (BCRA). A preliminary agreement between Argentine authorities and IMF technical staff, reached during the latest review of the country’s program, included a commitment to refinance or renew this debt.
The renewal commitment resolves a significant obstacle for the IMF’s $43 billion program with Argentina, as the government must demonstrate the availability of financing guarantees to manage its hefty debt. Details of the renewal or refinancing are not yet available, but speculation suggests Argentina may pay off part of the debt and renew the majority.
The IMF declined to comment, and neither the Argentine central bank nor the Chinese embassy in Washington immediately responded to press inquiries. The IMF’s executive board will vote on the agreement next Thursday, June 13, according to Argentine Economy Minister Luis Caputo.
In April, Caputo mentioned that Argentina is initiating discussions for a new IMF financing program that could involve fresh funds, and he noted that Milei’s monetary and exchange rate plans are part of the discussion.
The swap with China is the largest source of gross foreign reserves for the Argentine central bank, which currently faces debts exceeding its assets. This yuan swap line is the largest in the world. The first repayment installment is due on June 26, equivalent to 21 billion yuan ($2.953 billion). Another repayment of $1.969 billion at the end of July will bring the total to almost $5 billion owed to the People’s Bank of China.
Additionally, amidst this backdrop, Chinese battery component manufacturer CNGR has shown interest in acquiring stakes in lithium brine deposits in Argentina, aiming to strengthen its supply chain overseas. According to Bloomberg, senior executives from the company recently visited deposits in the Argentine provinces of Jujuy and Salta.
Argentina is the world’s fourth-largest producer of lithium, a key resource for the electric vehicle sector. Numerous Chinese companies, such as Tibet Summit Resources, Tsingshan, and Ganfeng Lithium, have invested in the country, drawn by the strong demand for lithium. Ganfeng Lithium, China’s largest producer of lithium carbonate, announced in March an agreement to purchase 15% of a project in northern Argentina for around $70 million.
Main source:
El FMI espera que China reprograme pagos de su línea swap con Argentina | Infobae (2024, junio 12).
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