More Argentine companies switch dollar debts into yuan

Electronics, automotive, tire and energy equipment companies are considering the strategy

More companies will start to use Chinese yuan to pay debts to international suppliers that were originally in dollars. The development comes after companies Mirgor and Newsan confirmed recently that they would be using the operation.

According to official sources, a schedule for these operations is being drawn up that includes electronics, household appliance, automotive, tire, and oil and gas equipment companies. This will immediately relieve pressure on the Central Bank, which has the equivalent of US$10 billion in yuan thanks to the expansion of the currency swap Economy Minister Sergio Massa negotiated in Beijing. 

The government is trying to overcome the reserve shock caused by the drought. Its goal is to maintain currency exchange stability in the midst of the pressure on parallel dollar rates, which is worsened by electoral uncertainty. Thus, the economic staff is seeking strategies that would give it greater scope for intervention. 

Despite skepticism from some market participants and private consultants, the expansion of the China swap, which provides US$10 billion of liquidity, has already been reflected in import operations. As was previously revealed by the Herald’s sister publication Ámbito, trade operations in that currency are growing fast. In January, there were operations for the equivalent of US$28 million, followed by US$62 million in February, US$69 million in March, US$1.07 billion in April, and US$1.08 billion in May. 

Meanwhile, companies Mirgor and Newsam —which are based in Tierra del Fuego— have voluntarily agreed to transform their upcoming debt payments from dollars to yuan for a total of US$630 million. Official sources confirmed that more corporations will go the same way, including companies in the electronic, household appliance, automotive, tires, and oil and gas equipment sectors. 

The government’s goal is to use as much yuan as possible for operations originating in China, thus freeing up their dollars for other purposes such as accelerating other imports or intervening in the markets and keeping a lid on financial dollar rates. 

Sources in the Economy Ministry don’t rule out using the US$10 billion available. That amount can cover both debt payments and purchases abroad and, as Economy staff explains, the financing can even overcome the trade deficit Argentina has with China, which is around US$8 billion per year. 

At the same time, it is hoped the forecast of better climate conditions will result in a recovery of US$1 billion during the fine-grain harvest, after the loss of nearly US$18 billion in coarse grain. Negotiations with the International Monetary Fund are also expected to help bring fresh funds into the country.   

While the bank’s reserve situation remains critical and industry leaders report obstacles in obtaining inputs, a recent report by the Secretary of Commerce states that 88% of import requests were approved between January and March. The survey also found that the total number of authorized imports in the first five months of the year reached US$36.76 billion, a 21% increase from the same period last year.  

Data shows that industrial activity is still growing. In April, the sector improved by 1.7% year-on-year and 1.2% against the previous month. Still, government sources admit there are obstacles, mostly to purchasing capital goods. Therefore, they are thinking about upping the advanced disbursements for small and medium companies from US$50,000 to US$100,000 (in yuan).

Originally published in


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