China remains reliable partner of Argentina
Javier Milei from the Liberty Advances coalition who won the Argentine presidential election on Nov 19 made some controversial remarks on China-Argentina relations during his election campaign.
Eyes will now be on his China policy once he is sworn in on Dec 10. However, as long as his priority is Argentina's economic and social development, the Milei administration will have to continue to build political and economic ties with China.
Given how complementary the Chinese and Argentine economies are, it is mutually beneficial for both countries to engage in deeper cooperation.
Trade is a major pillar of China-Argentina ties. From 2000 to 2022, trade volume between China and Argentina grew from $1.1 billion to $21.3 billion.
In addition to trade, China and Argentina also collaborate extensively in finance. Since 2009, they have maintained a bilateral currency swap agreement. In June 2023, the Argentine central bank and the People's Bank of China renewed the agreement, according to which the currency swap scale would reach 130 billion yuan ($18.26 billion). Thanks to the agreement, in August the Argentine government was able to arrange with a Chinese bank to pay the equivalent of $1.7 billion in yuan directly to the IMF to repay its $2.7 billion in dues. Financial cooperation with China enables Argentina to better cope with its currency depreciation, repay its IMF debts on time, and contributes to its macroeconomic stability.
Moreover, Chinese investment in Argentina's infrastructure plays a key role in Argentina's energy transition. Since 2015, Argentina has been seeking foreign investments in its wind, solar, hydroelectric and bio-energy sectors, as well as in building nuclear plants and large hydropower facilities. Chinese enterprises have been actively participating in the bidding processes and collaborating with Argentina's firms and local governments to build several renewable energy projects.
On the Cauchari Plateau in Jujuy Province in northwestern Argentina stands a photovoltaic power station, the Cauchari solar plant. More than 4,000 meters high and with a total power capacity of 315 megawatts, the solar plant built by Shanghai Electric Power Construction Co Ltd is the highest and largest solar plant in South America.
The Cauchari solar plant is expected to reduce Argentina's carbon dioxide emissions by 350,000 metric tons per year, helping the country to reach its climate targets. Furthermore, the project also benefits the local communities. The solar plant is also expected to bring about $50 million in revenue to the local government every year, which will help develop the local economies. The indigenous communities that own the land where the solar plant is located will also receive 2 percent of its annual profits, which could reach up to $1 million. The construction of the solar plant has itself also created around 1,500 local job opportunities.
Similar other renewable energy projects include the photovoltaic plant in the Salta Province. Such infrastructure cooperation and future collaboration opportunities laid the foundation for the two countries to jointly promote construction of the Belt and Road Initiative.
The Chinese government has been continuously working with different Argentine governments, regardless of their political ideology.
In recent years, Argentina has been confronted with severe economic challenges. Its annual inflation rate hit 124 percent in August 2023, its highest level since 1991. To curb inflation, the Argentine central bank raised the benchmark interest rate to 118 percent. Moreover, due to the worst drought over 60 years, the soy and corn harvest dropped significantly this year, aggravating its economic woes. Economic recovery is the most pressing issue facing the Argentine society. To save Argentina from diving deeper into the economic crisis, the Milei administration will need to collaborate more with international partners such as China.
The high level of economic complementarity between China and Argentina, the current multi-layered cooperation framework established and maintained by both countries, and China's firm commitment to building a community of shared future with Latin American countries all point to the fact that China is a trustworthy, reliable and indispensable partner of Argentina on its road to economic prosperity and social development. Once misunderstandings are overcome by clear communications between the two countries, China and Argentina will continue to showcase to the world the great opportunities and possibilities of South-South cooperation.
The author is an assistant research fellow at the Institute of Latin American Studies, Chinese Academy of Social Sciences.
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