Economy Minister Sergio Massa announced the start of foreign exchange operations in yuan for importing companies in order to relieve Argentina’s ailing international reserves. According to Massa, the Central Bank is set to save US$1 billion in April and US$790 million as of May.
“This will stop weighing on the outflow of our dollars and transfer to the outflow of yuan,” said Massa during the announcement at the Economy Ministry.
Business chambers that were consulted by Ámbito said that foreign trade in yuan with China streamlined operations in the past few days with “massive approvals” of import authorizations (Siras, for their name in Spanish).
Amid the sharp rise in the informal dollar exchange rate yesterday, Massa said that they will use all “tools” available to the state. Thus, this foreign trade measure will join this week’s market intervention and IMF renegotiation as a way to ease operations for importing companies.
“It gives us greater freedom and gives the Central Bank greater operational capacity. We’ve had to intervene over the past few days due to people speculating and over-speculating with the idea that we as a state don’t have the economic capacity,” said Massa.
The yuan available to the Central Bank to carry out this measure come from the fifth disbursement of a currency swap with China — the announcement means that exchange rate operations have been authorized for the US$ 5 billion from the People’s Bank of China.
“We have very good expectations with regards to Argentina and the confidence that they can maintain their economic and financial stability,” said Zou Xiaoli, Chinese Ambassador to Argentina, during the announcement. He also said that the mechanism “will reduce risks and costs.”
“China continues to support Argentina in the defense of its economic sovereignty,” said Massa.
According to one of the country’s business chambers, yuan “are used more and more frequently” for foreign trade. For that to happen, the business must be conducted with China and accepted by suppliers because they have to emit invoices in that currency. According to the economy minister, the measure will speed up imports because while most authorizations take 180 days, “with yuan they take 90 days.”
Nowadays there are increasingly more companies that approach banks like ICBC or HSBC, with Chinese capital.
“I have two clients that get supplies from China and they’re already coordinating their first operations with Siras using yuan,” said Fernando García Martínez from Quality Comex. “In this market, it’s estimated that the approval of Siras requested in yuan in the past month was 95%, versus a much lower percentage in other requests.”
Marcelo Elizondo, head of the Chamber of Commerce and Servicio (ICC) explained the impact that the measure could have on companies.
“It will give some relief on imports from China. On the side, it will mitigate the need for foreign currency but the scarcity is such that it does not resolve the underlying problem which is much bigger,” he said.
At the top of the list of concerns for imports is the issue of shipping following the changes introduced last week by the Central Bank, extending the timeframe in which it gives US dollars at the official rate to companies to 90 days.
“We can’t guarantee the flow of imports, there are doubts as to whether what is en route to Argentina will be able to be accessed. The fear is losing logistic autonomy,” one market broker told Ámbito.
Originally published on Ambito.com, translated by Valen Iricibar