With economic situation worsening at home, Argentinian president Alberto Fernandez has joined China’s Belt and Road Initiative with hope that Belt and Road Initiative projects and funds will help revive Argentina’s economy or atleast give a survival life line.
President Alberto Fernandez also pledged to deepen strategic cooperation on trade and currency swap between two countries, currently Argentina is said to have a 19 billion dollar currency swap agreement with China.
Argentina’s economic problems come from monetary and balance of payment financing as well as lack of policy reforms to reduce its fiscal deficit. Belt and Road Initiative is mostly associated with infrastructure development which may not actually help to deal with the above problems but it will help streamline the trade agreement between Argentina and China.
Joining Belt and Road Initiative will help Argentina to diversify the source of funding away from dependency on International Monetary Fund (IMF) and open a door to possible financing from Asian infrastructure Investment Bank (AIIB) and the the BRICS new development bank.
Argentina is in difficult situation and has been looking for unconditional financing as it tries to develop infrastructure and diversify its economy following talks with IMF because should Argentina default on IMF debt, it could lose access to foreign markets.
China is expected to invest 250 billion dollars in Latin America in this decade and bilateral trade between China and Argentina is about 20 billion dollars a year with China buying agricultural produce like soybeans, meat and seafood while Argentina buying telecommunications and IT equipment from China.
China has also invested in Argentina’s nuclear power plants and provided 2.5 billion dollars to upgrade Argentina’s main cargo rail network.
Argentina joins its neighbors like Uruguay who have joined Belt and Road Initiative, Brazil also promised last year align its national development program with China.
South America has been United States backward for years until recently when China started its Belt and Road Initiative but most importantly, the shift by South American countries from solely relaying on US to more of balancing act is due to the fact that US doesn’t have money to invest in the region currently and the region needs investments to continue growing.