With its dollar reserves rapidly dwindling, the Argentine government recently announced that it will begin paying for Chinese goods in yuan rather than US currency. The government made a formal announcement regarding the matter on April 26th.
In the announcement, the government stated that it would pay the equivalent of $1 billion in Chinese yuan for imports from China in a bid to relieve its dollar reserves beginning in April of this year. Moving forward, subsequent monthly payments of around $790 million will also be paid in yuan.
The announcement was made by Sergio Massa, Argentina’s Minister for the Economy during a press event following a meeting with Zou Xiaoli, Chinese Ambassador to Argentina, along with representatives from companies in a variety of industries.
Back in November 2022, Argentina entered a currency swap agreement worth $5 billion with China in the hope of strengthening the former’s reserves of international currency.
According to Massa, the agreement essentially allows the country to work on the possibility of advancing the rate of imports, essentially authorizing yuan-backed import orders in 90 days instead of the customary 180-day period.
A Critical Decision
Argentina’s decision to pay for imports in yuan is a timely one as its dollar reserves have fallen to critical levels.
A significant reduction in agricultural exports due to the most severe drought the country has experienced in decades has been pinpointed as one of the main causes of plummeting reserves.
Another key factor affecting the number of dollars in the government’s possession is political uncertainty arising from the country’s upcoming national elections later this year.