GLOBAL
POLITICS
Chinese Investment in Argentina:
The Road Ahead
By
Scott Squires
President Mauricio Macri
and Chinese counterpart Xi Jinping signed more than 30 deals on the
sidelines of this year's G20 in Buenos Aires.
Strolling through Barrio
Chino — Buenos Aires’ “Chinatown” neighborhood — the
smell of fried dumplings wafts from streetside food stalls,
providing a welcome departure from the city’s routine of steak and
potatoes. Despite the cheap plastic bric-a-brac and even cheaper
exoticism that pervade the shops in Barrio Chino, the
neighborhood is a stark reminder that Argentina is home to
thousands of Chinese immigrants.
Less apparent in Barrio
Chino is the political, economic, and social influence
China has quietly built in Argentina over the last decade. As China
closes in on the title of world’s largest economy, the Asian giant
has sought to increase its international presence. China now wields
substantial soft power through structural, financial and cultural
investment in nations unaligned with (or breaking free from) 20th
Century-style imperialism.
China has spent billions of dollars financing and constructing
energy and infrastructure projects, doling out massive loans at
wildly low interest rates. Accompanying these hard measures is an
international charm offensive, sending Chinese language education
and culture abroad.
Latin America’s third largest economy, Argentina is now the apple
of China’s eye. Argentines may be largely clueless about the
extent of the deepening Sino-Argentine relationship. But, as
evidenced by the more than 30 bilateral deals
President Macri and Chinese counterpart Xi Jinping signed on a
December 1 state visit, China’s impact is on the rise.
Constructing
Argentina’s future
China’s most visible mark on Argentina comes from its massive
investment in energy and infrastructure projects. Among these is
the multi-billion dollar Belgrano Railway refurbishment and
modernization effort. The key rail network connects Argentina’s
grain-rich pampas
to ports along the Parana River and the Pacific Ocean, enabling
Argentina to export soy, wheat, and beef to China.
In 2013, China agreed to finance two massive hydroelectric dam
projects in Patagonia for a combined price tag of $4.7 billion. The
dams, negotiated under former President Cristina Kirchner, were criticized as environmentally
disastrous. Macri even campaigned on a vow to suspend their
construction on taking office in 2015. However, after China
threatened to pull funding on the Belgrano Railway, citing a cross-default clause in the
construction contract, the dams were approved with a smaller, $4
billion budget.
China has invested in high-tech too, having funded two nuclear
power plants in Argentina. A third, the much anticipated Atucha III
nuclear plant, is reportedly being finalized, though
budget and timeline details remain private. China has even built a satellite communications base in
Argentina’s Neuquen region. The work done at the base remains
unclear, but surrounding communities have expressed their
dissatisfaction with the station and distrust over its purpose.
These projects only mark the beginning of a comprehensive
investment in Argentina. During Xi’s state visit, China promised an
additional $5 billion over the next five years in infrastructure
funding for roads, railways, and renewable energy. That number is
set to grow as China continues to push its Belt and Road
Initiative, a global campaign to link trade and transportation infrastructure in
developing countries while aligning those countries’ interests with
China’s.
Lending
a hand?
China’s financial influence in Argentina is equally as important,
though less visible. This month, the two countries expanded a 2009
currency swap agreement. The new agreement nearly doubles Argentina’s credit line
for a total $18.7 billion, making China Argentina’s largest
non-institutional lender.
The currency swap acts as a reserve line of credit for Argentina’s
central bank, which can request to draw on the funds at any time.
Unlike traditional currency swaps, however, Argentina can convert
the yuan it withdraws into other international currencies, effectively
creating an alternative source of financing. If Argentina finds
itself short on cash after its $56.3 billion financing agreement
with the International Monetary Fund runs dry in 2020, China will
be there to help.
It’s a win-win deal. On a domestic level, Chinese yuan sitting in
the Argentine central bank makes it easier for Chinese businesses
to facilitate trade and business deals in Argentina. Globally,
currency swaps allow China to internationalize its currency. By
making the yuan viable tender on the foreign exchange market, China
is putting its currency on par with the dollar, euro, or yen.
Throughout Latin America, China has spread financial influence by
purchasing ownership shares in commercial banks. In 2012 for
instance, the International Commercial Bank of China (ICBC) bought 80 percent of the shares of
Argentine Standard Bank. This provides China with yet another means
to position itself as a finance and trade partner for developing
nations.
Making
China relatable again
China’s social campaigns, cultural exchanges, study abroad programs
and language institutes have enabled it to spread its influence in
Argentina, and across Latin America.
Though Argentina is home to only two Confucius Institutes —
college-level Chinese language and cultural studies centers placed
in universities around the world — this month, Macri and Xi signed agreements to encourage
further cultural exchange between the two countries. This will
include fairs, museum exhibitions and festivals, as well as
academic exchange programs.
Argentina and China even agreed to promote each other’s film, TV,
and radio programming, and “encourage the exchange and production
of documentaries and soap operas” on TV and online content.
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