Argentina wants a bigger currency swap line with China to combat 100 percent inflation.

Freepik

Argentina has massive inflation and negative net foreign exchange reserves. 

Chart courtesy of TradingEconomics.Com, annotations by Mish

With things spiraling out of control, Argentina Seeks Bigger China Swap Line to Prevent Peso Selloff

Economy Minister Sergio Massa will travel to Beijing May 29 to renew and renegotiate the swap line with his Chinese counterparts. How much Massa seeks to expand it by — and the amount he can freely use — remain unclear. His press office didn’t respond to a request for comment. 

The trip comes as Massa, seen as a potential presidential candidate in this year’s election, is trying to contain a peso selloff that’s part of a vicious cycle in Argentina’s inflation crisis with prices rising 109% annually through April amid a severe shortage of dollars. In parallel, Massa is also renegotiating Argentina’s $44 billion program with the International Monetary Fund, seeking to get more IMF cash in June than currently planned. 

Argentina and China signed a 70 billion yuan ($9.9 billion) swap line agreement in 2009 and expanded it to 130 billion yuan in 2020. It was rarely touched and viewed by investors as a last resort option. In recent months, China has allowed Argentina to use up to $5 billion of the swap, known as the “operating account,” to finance imports from China or let local companies pay off foreign currency debt in yuan.

Trend Continues

What trend is that? 

Argentina going bust again? Belief that any swap line agreement from China might matter?

Hoot of the Day

As of December 2022, Argentina's Net External Debt is $277 billion. 

"Argentina and China signed a 70 billion yuan ($9.9 billion) swap line agreement in 2009 and expanded it to 130 billion yuan in 2020."

That's about $18 billion total. Of which, China allowed Argentina to use $5 billion in an operating account. 

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