The shortage of international reserves of the Central Bank prompted the Government to renew and extend last week the swap with China, an exchange of currencies that in theory allows Argentina to pay with yuan for imports and free for other uses the dollars that were destined for trade with the Asian giant.
This agreement, which began in 2009, when the president of the Central Bank was Martín Redrado, plus the difficulty in retaining dollars meant that 55% of gross reserves – which are around US $ 32.800 billion – are integrated with yuan and are more exposed to the movements of that currency.
This is how in May, when the dollar went from 6.91 to 7.13 yuan, a devaluation close to 3%, Argentine reserves fell US $ 507 million, according to the accounts of the consultancy EcoGo. In the year the losses due to this effect reach US$ 540 million.
In this way, the swap for 130,000 million yuan, which was 19,000 million dollars, according to Economía, is already closer to US $ 18,000 million
But, in turn, according to Sebastián Menescaldi, of EcoGo, the rate to be paid measured in dollars also becomes cheaper. And imports from the Asian country also become more accessible (there are already several companies that announced that they will operate in yuan, such as Newsan or Mirgor).
According to Marcelo Elizondo, a specialist in Foreign Trade, with a devaluation of the yuan "reserves can have a decrease in their nominality because they are computed in dollars. But, in practical terms, the yuan is only used to pay for imports. It is not true that it can be used to intervene in the foreign exchange market. So in practical terms there is no major damage (if it continues to devalue), because you will continue to pay imports from China."
"The only problem that can happen," he warns, "is that the devaluation of the yuan causes the prices in that currency of the products we buy from China to rise. There it is no longer a problem of our reserves, but that we have to pay more for imports. But that will be a global problem, not just ours," adds the specialist. But he clarifies that for that to happen there would have to be "a more sustained and larger depreciation of the yuan."
"The truth is that less than half of the first tranche of the $5 billion swap has been used. And a second tranche of the same amount was granted after having used the first tranche, which – for some reason – is a little delayed," explains Elizondo.
China confirms swap
The Chinese Central Bank (PBOC) reported the signing of the agreement to extend the currency swap with Argentina.
A week after Sergio Massa announced the renewal of the swap, the Central Bank of China (PBOC) confirmed the agreement in a brief statement.
"With the approval of the State Council, the People's Bank of China (PBOC) and the Central Bank of Argentina (BCRA) have recently renewed the bilateral currency swap agreement. The size of the deal is 130 billion yuan or 000.4 trillion pesos. The agreement has a maturity of 5 years," they said, without referring to the US $ 3,5 million or 000 billion yuan of free availability or its extension to 35,70 million, as reported by Economía.
Massa had assured that the conditions of the pact (such as what the rate is or what it can be used for) were covered by a confidentiality agreement requested by the Chinese.