Argentina and China have extended their currency exchange agreement, known as a “swap”, for the equivalent of 6.5 billion dollars, in order to strengthen Argentina’s foreign exchange reserves, President Alberto Fernandez announced on Wednesday.
We asked for $5 billion and they gave us $6.5 billion, which represents a big relief for Argentina, announced Mr. Fernandez Radio10 from China, where he is on an official visit. The reserves of the Argentine Central Bank stand at $25 billion according to the official balance sheet published on Tuesday, although analysts estimate that net reserves are much lower.
A strengthening of reserves vital for Argentina
Strengthening these reserves is vital for Argentina in a scenario of high currency volatility. Last Tuesday, the dollar crossed the threshold of 1,000 pesos per dollar on the parallel market (compared to 365 at the official rate). We have just finished a very good meeting with President Xi Jinping. We told him our problems and, once again, the Chinese government listened to our requests and provided us with very significant assistanceadded the Argentine president.
Argentina votes on Sunday to elect its president. The Minister of the Economy, Sergio Massa, is the candidate of the government bloc (center-left), but the favorite, according to the polls, is the ultraliberal Javier Milei, a supporter of dollarization of the economy. Last week, the latter panicked the markets by ordering Argentines not to save in the national currency, believing that it is not even worth a dime.
Within 36 hours, the peso collapsed before recovering slightly. On Tuesday, the dollar was trading at 985 pesos on the parallel market. The collapse of the peso takes place in a context of galloping inflation (140% over one year). The country has committed to the International Monetary Fund (IMF) to strengthen its dollar reserves this year with the objective of bringing them to nearly a billion by the end of the year. Argentina has a debt of 44 billion dollars with the IMF.