China throws Argentina a US$23.7bn lifeline

Argentina and China signed deals worth US$23.7bn over the weekend, offering the former direct financing in US dollars without the need to repay dollar-denominated loans.

The resources will also go to key projects for Argentina’s recovery.

“Argentina needs dollars. So, anything that arrives in dollars helps both the agreement with the IMF and helps Argentina’s economic situation, whose main issue is dollar scarcity,” Hernán Letcher, head of economic policy think tank CEPA, told BNamericas.

The agreements involve US$14bn for 10 infrastructure projects and US$9.7bn for an ad hoc bilateral group that will manage joint projects, particularly those linked to the Belt and Road Initiative.

“This is [China’s] way to help Argentina within the context of the deal with the IMF. Not through another loan to replace the IMF’s, but it does help with access to dollars,” Letcher said, adding that Beijing’s main objective is to insert itself in the local market, regardless of Argentina’s domestic politics. 

One project included in the first deal is the second stage of the US$1.9bn Transport.ar gas pipeline network, news outlet Infobae reported, citing documents from the foreign affairs ministry. Letcher said the deal could also benefit Argentina’s dollar situation.

This network will transport gas from the Vaca Muerta shale formation to the northern provinces. “Basically, it allows to save what is normally used to buy gas from Bolivia, and that also means foreign currency savings,” Letcher said.

In the short term, the US$4.7bn Néstor Kirchner-Jorge Cepernic hydro project, currently paralyzed, could also benefit, according to Letcher.

The deals involve rolling stock acquisitions for the Roca line, the rehabilitation of the Belgrano Cargas Norte rail, stages 1 and 2 of the San Martín Cargas rail rehabilitation, funds for Buenos Aires metropolitan transmission lines, the Atucha IV nuclear plant, the Cerro Arauco wind/solar project, and the Cierre Norte gas pipeline.