World Economy

Currency Swap With China Saves Argentine Economy

Currency Swap With China  Saves Argentine EconomyCurrency Swap With China  Saves Argentine Economy

A massive currency swap deal reached between China and Argentina in July 2014 has greatly helped and even “saved” the South American country, a special report said Thursday.

“The end of the commodities super-cycle has strongly impacted the region,” but the currency swap agreement with China saved Argentina’s economy by helping shield it from international financial woes, said Ramiro Castineira, a specialist from the private consulting firm Econometrica, Xinhua reported.

According to the report, Argentina’s export revenue dwindled due to a sharp drop in soybean prices this year, but the currency swap deal has helped prop up the peso, avoiding its devaluation.

The report said the swap would enable President Cristina Fernandez to stimulate consumption in an election year. The president earlier pledged not to devalue the peso before the Oct. 25 election.

Argentina and China inked a three-year currency swap deal in July 2014 during Chinese President Xi Jinping’s Latin American tour. It came shortly before Argentina fell into its second default in 12 years, which further undermined its reputation among global creditors.

Under the agreement, Argentina can pay RMB when importing products from China. The swap has boosted the foreign reserves of Argentina, a country locked out of international bond markets since 2001.

When the first interchange took place in October 2014, worth $814 million, the Central Bank of Argentina said the yuan “represented a very attractive investment currency for central banks.”

“Furthermore, the yuan can be freely converted into dollars, euros or any other reserve currency in international (financial) centers such as Hong Kong, London or Singapore,” the central bank said in a statement.

China is boosting its efforts to popularize the yuan. According to the People’s Bank of China, the central bank, Beijing has signed currency swap agreements with 32 countries and districts as of the end of May, with the total value hitting 3.1 trillion yuan ($484.8 billion).