Argentina to Settle Chinese Imports in Yuan to Safeguard Dwindling Dollar Reserves

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The economy minister of Argentina, Sergio Massa, announced that starting this month, payments for imports coming from China will be settled using the Chinese yuan. The agreement, which will allow the country to safeguard its dwindling dollar reserves, involves the disbursement of more than $1 billion in April.

Argentina to Settle Bilateral Transactions With China in Chinese Yuan

Argentina, one of the big three economies in Latin America, will use the Chinese yuan to pay for certain imports. According to statements from Argentine Economy Minister Sergio Massa, the country will begin settling payments for Chinese imports using the Chinese yuan, in the context of saving the scarce dollars that the country still has left.

The agreement is perceived by analysts as a positive pact for the nations, as China deepens the penetration and usage of the Chinese yuan in Latam, and Argentina manages to leverage $5 billion of the “swap” reserve that was approved between Argentine President Alfredo Fernandez and Chinese President Xi Jinping, solidified in a bilateral meeting which took place at the 17th G20 summit back in 2022.

China is currently Argentina’s international partner, and this move will ostensibly allow the country to lessen the weight of imports on the weakened state of Argentine reserves. Just for April, there are already $1.07 billion in imports that will be settled with the Chinese yuan, and $0.8 billion are already set to be paid in the same way in May.

Argentine Crisis and Reactions

The Chinese concession given to Argentina by Chinese President Xi Jinping allows the central bank to focus its attention on the devaluation and inflation spiral Argentina is currently experiencing by injecting resources to stabilize its fiat exchange rate, which reached record lows last week against the U.S. dollar.

Massa also stated that using the Chinese yuan will serve to disarm a corruption scheme that justified using Uruguay as a bridge for the payment of Chinese imported goods in dollars. In this regard, he stated:

This swap in the guarantee of continuing to produce with intermediate goods from China, avoiding the triangulation detected — which was somehow used to pay more for what Argentina imported, than what (the intermediary) bought cheaper.

The measure generated mostly positive reactions from the main Small and Medium Enterprise (SME) associations according to Argentine news agency Telam. Leo Bilanski, president of ENAC, one of these organizations, said operating using the Chinese yuan presented several advantages. He explained:

Being able to operate in the national currency of both countries makes trade transparent and boosts, for SMEs, foreign trade operations within a framework of dollar restrictions and financial speculation with the illegal dollar.

What do you think about the shift to the Chinese yuan that Argentina is executing to settle bilateral transactions with China? Tell us in the comment section below.