In a bid to address the scarcity of US dollars, Argentina is making significant strides in using the Chinese Yuan for trade and reserves, bolstered by the recent renewal and expansion of a currency swap agreement with China. The utilization of the Yuan in bilateral trade reached 1.075 billion Yuan ($150.5 million) in May, according to the Argentine Central Bank’s report on June 15. Furthermore, in the initial ten working days of June, transactions worth 2.045 billion Yuan ($286.3 million) were documented.
This increase in the utilization of the Yuan coincides with the recently ratified accord between the Central Bank of Argentina and the People’s Bank of China, which extended and enlarged the currency exchange agreement to a total of 130 billion Yuan (approximately $18.2 billion) over a span of three years.
The decision to utilize the Yuan for payments of imports from China, instead of relying on the US dollar, is expected to assist Argentina in mitigating the depletion of its central bank reserves.
According to official statistics, China is identified as Argentina’s second-largest provider of merchandise, with imports totaling $3.158 billion in the initial quarter of the current year.
Furthermore, thanks to the currency swap agreement, the Argentine Central Bank can now engage in Yuan operations to ensure financial stability in the country’s foreign exchange market, which has often faced strong demand for US dollars.
The Argentine monetary authority has also disclosed that it holds its own reserves in Yuan, in addition to the 35 billion Yuan ($4.9 billion) accessible through the currency swap arrangement.
As per the recent agreement, Argentina has the capacity to activate an additional 35 billion Yuan from the swap, which will be provided to the central bank as the initial 35 billion Yuan is utilized, based on financial needs and the requirement for reserve reinforcement, clarified the monetary authority in an official statement.
With the Argentine Central Bank grappling with severe challenges in preserving its monetary reserves, it has implemented restrictions on access to foreign currency for import payments since June of last year. However, these measures have complicated the operations of companies reliant on importing intermediate goods for production.