In the uncertainty of exchange rates due to the lack of reserves, the Government is advancing its intention to do so replace the dollar with the yuan in imports with China. Although the Mao Tse-Tung face note does not circulate on the street or is used as a savings currency, the Ministry of Commerce authorized imports of US$ 1,717 million as of last Sunday, 34% of the amount available in Central Bank reserves.
Operations in that currency have begun to accelerate since the Minister of Economy, Sergio Massa, announced at the end of April, in a meeting with the Chinese ambassador, the “activation” of the exchange with the Asian country. There it was agreed, according to the official statement, that “Argentina should stop paying imports in dollars and go in yuan”, which implied the authorization of purchases from China by $1,081 million in April and $636 million so far in May.
Between January and April 2023, imports were actually paid for in Chinese currency for the equivalent 76 million dollars. An amount less than the 50 million dollars that the BCRA managed to buy this Wednesday on the foreign exchange market.
Massa advanced that plan to ease pressure on the dollar amid difficulties in obtaining an advance on IMF disbursements as financial aid from Brazil. The exchange with China in force since 2009 now reaches the equivalent of 18.8 billion dollars. China has authorized the use of 5 billion dollars for foreign trade.
Due to tightened exchange restrictions and a cheaper import exchange rate ($231), companies began to apply for SIRA permits in yuan or to replace the ones they had in dollars with Chinese currency. The benefit is that authorization is faster and the foreign exchange access period could be reduced from 180 to 90 days for large companies and from 90 to 60 days for SMEs. “It’s the only thing they’re authorizing,” a specialist said.
At least 12 banks have already started consultations with the ICBC use the entity as an intermediary, while the HSBC extension It has been operating with yuan for a long time and Banco Nación is also enabled. “It’s working, I’ve already done a lot of transactions in yuan, and I’m also exchanging SIRAS to dollars for yuan. The advantage is that reducing the payment term reduces the exchange rate risk,” said an entrepreneur who has carried out 20 currency transactions Chinese.
One of the elements that stands out is the electronics. Through Chinese banks, Newsan began using the yuan to pay for supplies of washing machines and refrigerators this year that does. China also exports components for mobile phones, monitors, projectors, radios and TVs to Argentina. And even the cars of that origin have begun to arrive through this mechanism: this year almost 800 zero kilometer vehicles were purchased with Chinese currency.
With energy, something similar could happen. Massa has lowered the order to his secretaries at the Ministry of Economy to use the yuan in public purchases abroad. The energy sector requested US$1.8 billion in the first quarter, with its impact on reserves. “There is a clear intention to offer yuan to all imports, but it has not been formally offered to pay for diesel vessels,” an official source said.
The exchange, in fact, accelerates the sale of Chinese products to Argentina. Argentine companies are trying to stock up while waiting for a devaluation and the exchange gap with the official favors the advance of imports. In that picture. In this framework, the use of the loan with the Asian country would avoid the drainage of dollars, but it comes at a financial cost. The rate varies between 7.5 and 9.5% per annum payable in one year, renewable up to three years.
Right away, swap activation is encouraged by China, a country that between 2008 and 2021 lent $240 billion to developing countries. Its intention is to install its currency as an international currency and unit of exchange in the IMF, which generates tensions with Brazil. Argentina’s main trading partner has reduced its bilateral exports and is looking with concern at the possible extension of the import swap tranche to US$9 billion.
Massa will travel to Beijing on May 29 to carry out these negotiations. Despite currency purchases in recent rounds, the central bank has not been able to halt the fall in reserves and the use of the yuan is still in its infancy.
Source: Clarin
