LatAm List – As Argentina has come under yet another credit crunch in 2018, they looked to China to help boost their dwindling foreign reserves. After making an original deal for a swap of 70 billion yuan, Argentina’s Central Bank President Guido Sandleris recently announced the deal would be expanded by 60 billion yuan to reach 130B yuan (US$18.7B).
This strategic financing by China is another way to extend Chinese influence within Latin America. The Chinese government has increasingly invested in infrastructure projects, technology, and startups in Latin America over the past few years. Chinese FDI to Latin America topped US$15.3B in the first half of 2018, while Chinese FDI to the US dropped to just US$1.9B.
Nathan Lustig, Managing Partner of Magma Partners, a venture capital firm in Chile with strong ties to China, said:
“As the U.S. is looking inward, China is continuing to invest in the region. Between currency swaps and tech investments, China is filling the gap in Latin America.”
Despite the deal, inflation is still expected to run rampant in Argentina this year. Already the value of the peso against the dollar has dropped by half in 2018. This Chinese currency swap is meant to stabilize the economy to boost Argentina’s growth.
Read more in the original article for Reuters.
