Argentina to Deal Bigger China Swap Line to Prevent Peso Selloff

Economy Minister Sergio Massa will travel to Beijing May 29 to renew and renegotiate the swap line with his Chinese counterparts

Sergio Massa.
By Ignacio Olivera Doll
May 24, 2023 | 09:48 AM

Bloomberg — Argentina’s government is asking China for an expansion of its bilateral currency swap in yuan as it seeks to build up central bank reserves in a bid to contain another peso selloff with inflation already running above 100%, according to two people with direct knowledge.

Economy Minister Sergio Massa will travel to Beijing May 29 to renew and renegotiate the swap line with his Chinese counterparts. How much Massa seeks to expand it by — and the amount he can freely use — remain unclear. His press office didn’t respond to a request for comment.

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The trip comes as Massa, seen as a potential presidential candidate in this year’s election, is trying to contain a peso selloff that’s part of a vicious cycle in Argentina’s inflation crisis with prices rising 109% annually through April amid a severe shortage of dollars. In parallel, Massa is also renegotiating Argentina’s $44 billion program with the International Monetary Fund, seeking to get more IMF cash in June than currently planned.

For China, it’s another opportunity — albeit risky lending more to a serial defaulter in Argentina — to expand the yuan’s global use in a bid to diminish dependence on the US dollar.


The People’s Bank of China has signed currency swap agreements with some 40 countries since 2008 to promote the international use of the yuan. Activities through such swaps have accelerated over the past two years, and global central banks tapped a record amount of yuan through swap agreements in the first quarter.

Argentina and China signed a 70 billion yuan ($9.9 billion) swap line agreement in 2009 and expanded it to 130 billion yuan in 2020. It was rarely touched and viewed by investors as a last resort option. In recent months, China has allowed Argentina to use up to $5 billion of the swap, known as the “operating account,” to finance imports from China or let local companies pay off foreign currency debt in yuan.

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Massa intends to ask Chinese leaders to increase the total amount, according to the two people, who asked not to be named to discuss private negotiations. One of them added that Massa will also request a larger operating account too, meaning free access to a greater portion of the swap.


Argentina’s central bank is increasingly offering more yuan in its foreign exchange market to get around the dollar shortage. The volume of yuan in the foreign exchange market today doesn’t exceed 10% of the total, but it is accelerating, one of the people said.

The PBOC is becoming an influential lender of last resort, providing almost $200 billion in assistance to a number of countries in need in the period 2016-2021, according to a study earlier this year. Much of that has been in the form of FX swaps, of which the central bank had signed 3.54 trillion yuan worth of at the end of 2021, with 109 billion of those in use at the end of March this year.

With elections in October, Argentina is expected to enter recession this year as triple-digit inflation and a record drought hitting commodity exports are hurting wages and activity.

--With assistance from Yujing Liu and James Mayger.

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