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Argentina agrees with China to adopt the yuan instead of the dollar in trade transactions

Fatima Shawky

Thursday, April 27, 2023 11:09 AM

Argentina announced that it agreed with China To pay in yuan, not dollars, for imports from that Asian country, a measure that seeks to mitigate the loss of Argentina’s reserves, according to the Argentine newspaper “Infobay”.

“This improves the outlook for Argentina’s net reserves,” said Argentine Minister of Economy Sergio Massa, in a meeting with the Chinese ambassador in Buenos Aires, Zhou Xiaoli, and representatives of companies from various sectors.

According to what was agreed upon, Argentine companies will pay in yuan for their imports from China in April, which represent 1.4 billion dollars, and will start from May.

According to official data, China is the main source of imports provided by Argentina, as its purchases in 2022 amounted to about 17 billion, or 21% of the total imports of the South American country.

Massa noted that due to “the worst drought in the country’s history,” with exports down $15 billion this year, the Argentine economy “is faced with the challenge of maintaining and strengthening working reserves.”

The Argentine central bank is facing serious difficulties trying to contain the loss of cash reserves, and it has also kept restrictions on access to foreign currency to pay for imports since June last year, complicating the activity of companies that need to import.

Massa indicated that this scenario “forces us to rethink” the refinancing agreement signed in 2022 with the International Monetary Fund, which includes reserve accumulation among its objectives, as well as “redefining the business strategy” with importers and exporters.

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The agreement with China was announced yesterday, Wednesday, at a time of strong tension in the exchange rates in Argentina, with the rise in the prices of the US currency in the parallel markets.

Massa stressed that the agreement with China gives Argentina, among other things, “greater freedom” and “capacity” for the central bank to act “in these days” when the government “has to decide to intervene against those who over-plan”. in foreign exchange markets.