The Milei effect (and not only) on trade between Argentina and China
China is no longer Argentina's top trading partner, but has slipped to third place. Does the pro-US positioning of the new president Javier Milei also have something to do with it?
What was recently documented by the Argentine Ministry of Economy regarding the fact that China is no longer Argentina's first partner but has positioned itself in third place should not come as a surprise: the first trading partner is the European Union, and this does not this could only be excellent news for Europe.
If on the one hand all this was determined by a decline in imports as well as exports, the real reasons for China's economic downsizing in Argentina depend both on the fact that China has directed its exports towards Brazil, also because the Argentine president has clearly took a pro-Israeli and pro-US position. This of course does not mean that there are specific deadlines, such as the one relating to a Chinese loan dating back to 2009.
One reason is related to the explicit anti-communism professed by the Argentine president. On the other hand, it is certainly no coincidence that up to now the Argentine president has not met the Chinese president. However, to clearly understand this position we need to take a step back and get to 2022-23 . As we know, economically Argentina has an economy characterized by hyperinflation and therefore by an absolutely unstable financial situation. Precisely for this reason, last year the Minister of Economy Sergio Massa, notoriously close to the Chinese positions, went to China to strengthen the economic partnership with China. Another critical issue linked to the Argentine economy is the famine which hit agriculture very hard in 2023.
Regarding the partnership with China, we know that Argentina joined the New Silk Road in 2022 with the aim of establishing a synergy in the context of infrastructure, energy and of course trade. The membership that China obtained from Argentina has a precise counterpart: Beijing had promised to invest as much as 24 billion dollars. In June 2023 – as we mentioned earlier – Argentina obtained new and significant financial aid from China. The two central boats have in fact renewed the 2020 agreement according to which Argentina will import from China paying not in dollars but in yuan.
In light of what we have said, however, we believe we need to make some clarifications on the economic logic that underlies the partnerships that China establishes with its commercial allies. Overall speaking, Chinese investments are related to infrastructure and energy. Among the major countries that have benefited from Chinese financing are, in addition to Argentina, naturally also Brazil, Ecuador, Venezuela, Russia, Pakistan and Iran. The indebtedness of these countries is a fact, but this indebtedness has a peculiar dimension: the debts have different purposes. The loans made by Beijing are predominantly related to infrastructure and mining, unlike those from the World Bank or the Monetary Fund. But there is also another extremely interesting fact: the loans disbursed by the main Chinese banks dropped significantly from 2016 to 2021 with the aim of financing more limited projects. There is no doubt that among the reasons for this redefinition of Chinese economic policy are the economic war with the United States, Covid and the current war in Ukraine.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/cina-argentina-commercio/ on Thu, 02 May 2024 05:54:49 +0000.