Javier Milei was never Beijing’s preferred candidate to win Argentina’s presidential elections. The radical libertarian and self-described anarcho-capitalist campaigned on severing ties with “communist” China, referred to its government as “assassins,” and accused the CCP of killing dissidents. His electoral victory now complicates relations between the two countries. Against the backdrop of Argentina’s economic crisis and the geopolitical realities that limit his options for maneuver, Milei has softened his antagonistic rhetoric somewhat since he took office last week. As Igor Patrick reported for the South China Morning Post, Beijing is using its financial leverage to preserve a close relationship with Buenos Aires:
China has suspended a US$6.5 billion currency swap agreement with Argentina, and the freeze remains in effect until President Javier Milei demonstrates a clear intention to engage with Beijing, Argentine media have reported.
News of the move comes just 10 days into the tenure of the new president, who campaigned on breaking ties with China, and underscores the challenge Milei will face in trying to follow through with those pledges.
[…] The funding is part of a deal renewed annually since 2009, crucial for Buenos Aires due to its negative holdings of international dollar reserves. Argentina has relied on such swaps as one of its few credit options, given the South American nation’s reputation for defaulting on international debt. [Source]
While Argentina’s economic crisis made voters eager for radical change, it has also complicated Milei’s position. The country is beset by triple-digit inflation, a poverty rate above 40 percent, and public debt at 90 percent of GDP. Part of Milei’s stated solution was to dollarize the economy (by scrapping the Argentine peso and replacing it with the U.S. dollar) and bring Argentina closer to the U.S. But with debts to the IMF at 44 billion USD and 10 billion USD of foreign reserves in the red, Chinese officials warned that Milei is in no position to alienate Beijing and its important source of finance. Social media users in Argentina quipped that Milei had it coming, commenting that he cannot expect to get money from someone he had just insulted. Under a Global Times post about large-scale demonstrations against Milei’s government, Weibo user 悟客心的世界 wondered, “Wasn’t he elected by the Argentinians themselves? In addition to playing football with their feet, do Argentinians also think with their feet?” In response, Weibo user 幽州行者 noted, “Half of the voters didn’t even vote for him, so they took to the streets.”
Milei’s lack of leverage led to some backtracking on his rhetoric. Shortly after taking office, he personally requested financial support from Xi and asked Beijing to renew the currency swap deal. This week, he appointed career diplomat Marcelo Suárez Salvia as Argentina’s new ambassador to China, in what some in Argentina saw as a gesture to ease tensions with Beijing. In the Latin American Advisor, a daily publication of the Inter-American Dialogue, several analysts argued that Milei was forced to temper his ideological stance with pragmatism:
Benjamin Gedan, director of the Latin America Program at the Wilson Center:
“The moderation of Javier Milei’s attitude toward China was as predictable as the chimichurri that shows up at your table after your bife de chorizo. Argentina’s economy is in shambles, and it can scarcely afford to lose access to its most important export market and principal source of hard currency. Nevertheless, Argentina’s strategic relationship with China rests on a knife edge. True, Milei has dialed down his hostility toward Beijing, and he and Xi Jinping exchanged diplomatic pleasantries on X. But in a region where China is accustomed to flattery and a studied nonalignment in great power competition, Milei stands out for his ostentatious admiration of the United States.”
[…] Jorge Heine, research professor at the Frederick S. Pardee School of Global Studies at Boston University and former ambassador of Chile to China:
“[…] Milei is caught between a rock and a hard place. He needs the United States to help renegotiate its $45 billion debt to the IMF, which Argentina can’t pay. Yet, he also needs the Chinese market. Whereas the Argentine and the Chinese economy are complementary, the Argentine and the U.S. economy are not. The United States will not buy soybeans, meat or grains from Argentina, and neither will Israel. Either Milei accepts this hard reality, or his government will start teetering from the word go.” [Source]
Oliver Stuenkel at the Carnegie Endowment for International Peace outlined China’s inroads into Argentina and close economic ties prior to Milei’s tenure:
After Brazil, China is Argentina’s second-largest trading partner, and also the second-largest destination for Argentine exports, such as soybeans and beef. Trade has steadily increased over the past decade. In 2010, only 5 percent of Argentina’s imports were Chinese products. Now, Chinese products make up 20 percent of Argentine imports. In all of Latin America, Argentina has received the most loans from China’s “big five” commercial banks, signaling Beijing’s stake in the country. Argentina officially joined the Belt and Road Initiative in 2022 and signed trade and infrastructure agreements worth more than $23 billion. The most strategically significant of these are two hydroelectric dams in Santa Cruz and the Atucha III, an $8 billion nuclear power plant that will aid Argentina’s advanced nuclear industry. China is also seen as a partner in Argentina’s plans to become an important provider of lithium in the global energy transition (for electric vehicles, for example). After Chile, Bolivia, and Australia, Argentina holds the fourth-largest lithium reserves in what many see as a bright spot in Argentina’s overall economic outlook.
Many, but not all, of China’s inroads are economic. China’s presence is evident, for instance, in Patagonia, where the People’s Liberation Army has operated a space research station since 2018, or in Ushuaia, the southernmost tip of Argentina, where China was eyeing the construction of a naval base as recently as 2021. That plan seems to have been paused, but it still shows the potential growth of China’s power there. [Source]
A senior official on Milei’s transition team stated earlier this month that Argentina would not join the BRICS—a bloc of developing countries including Brazil, Russia, India, China, and South Africa—despite being invited in August. Argentina’s future participation in the Belt and Road Initiative (BRI) is also uncertain. It formally joined the BRI in 2022 and in June Sergio Tomas Massa, Argentina’s former economy minister and Milei’s election opponent, signed a cooperation deal to further promote the BRI. Now, some analysts anticipate that Milei may try to pull government support from Chinese-funded infrastructure projects.
Sharing some more upbeat perspectives on the future of Argentina-China cooperation just before the election, Fermín Koop from Diálogo Chino highlighted other limitations on Milei’s desire to scale back collaboration:
Ignacio Villagran, director of the Argentina-China Studies Centre (ACSC) at the University of Buenos Aires, agrees: “For China, it doesn’t make a difference who is in power as long as the investment projects continue. While there’s a question mark on Milei, he won’t have a say on what the provinces agree with China.”
Argentina’s federal structure means its provinces can engage with China independently from the national government. This has been the case of the northern province of Jujuy, for example, with the province hosting Cauchari, a 300 MW solar plant financed by Chinese banks, as well as a lithium extraction plant partly owned by Chinese mining firm Ganfeng Lithium.
[…] Guo Cunhai, coordinator of the Centre for China and Latin America Studies (CECLA) at the Chinese Academy of Social Sciences, said that the relationship between China and Argentina has withstood complex situations before and will likely continue to do so. “The basis of the relationship is mutual need. Cooperation will benefit both sides and division will harm both,” he added. [Source]