Argentina is in talks to renew and potentially expand its currency swap line with China, official sources confirmed today. The government’s goal is to double the free access amount, taking it to US$ 10 billion, an official source told the Herald. The negotiations for that are very advanced, the source added.

The country has free access to some US$5 billion as part of the China currency swap agreement that totals 130 billion yuan (US$18.81 billion). The two countries activated the usable portion in January to help bolster Argentina’s peso.

Another government source told the Herald that the idea is to expand the total amount of the swap as well.

Last month, the government announced the start of foreign exchange operations in yuan for importing companies in order to relieve Argentina’s ailing international reserves.

“The idea is to have everything sealed to travel and sign at the end of the month,” a source quoted by Reuters said. Economy Minister Sergio Massa and Central Bank Director Miguel Pesce are expected to travel to China from May 29 to June 4.

Two weeks ago, during the annual summit of the United States Chamber of Commerce in Argentina (Amcham Argentina,) Massa said that “if political conditions are met and if the Chinese Central Bank agreed,” the free access amount could be expanded.

Argentina must rebuild its reserves to cover trade costs and future debt repayments, as well as to meet economic targets under its $44 billion loan program with the International Monetary Fund (IMF), which it is currently trying to revamp.

China has been touting international usage of the yuan currency as a rival to the U.S. dollar, gaining a foothold in South America where it is the largest trade partner for many regional economies.

Argentina’s foreign currency reserves have fallen sharply this year as a major drought battered exports of cash crops corn and soy and the peso weakened, pressured by 109% annual inflation and political uncertainty ahead of elections in October.

—Buenos Aires Herald / Reuters