They renew the exchange with China and extend the amount of “free availability” to intervene on the dollar to 10 billion dollars

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Advised by Ambassador Sabino Vaca Narvaja, before going to China, Sergio Massa asked his friend Chiqui Tapia for some 30 national team shirts with the printed name of the officials with whom he came to negotiate. So he offered the powerful president of the People’s Bank of China, Yi Gang, one with his name and the mythical number 10, which corresponds to Leo Messi.

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And that gift seems to have been the key to unlocking the agreements and, above all, what the Economy Minister came to look for: the renewal of the exchange with China.

Massa brings to Argentina the advance of this renewal of the exchange rate with China for the equivalent of US$ 19,000 million.

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It expired in August and was signed today with the clear intention of strengthening reserves, as well as increasing the overall amount in $1 billion more.

Inside that package you have the ability to use US$10,000 million as freely availablethat is, to be able to intervene on the foreign exchange market and avoid sudden shocks of the dollar.

Accompanied to the headquarters of the People’s Bank of China by Miguel Pesce, president of the Central Bank, and by Marco Lavagna in the dual role of head of INDEC and secretary for international financial affairs, Chinese officials have announced that for the use of availability of yuan first they have to use up the US$5,000 million that the Central Bank has and then resort to the other US$5,000 million,

These movements by the Minister of Economy hide a single strategy, avoid a devaluation jump which he believes is passed on to prices in times of high inflation.

Pesce knows the technicians of the highest Chinese monetary authority well, given that in 2020 he had to renegotiate the newly renewed swap. Together with Massa, they also received tickets for the national team’s friendly match against Australia which will be played on the 15th at the Workers’ Stadium in the heart of Beijing.

The head of AFA brought him about 40 tickets that the minister distributed at his meetings and which the Chinese appreciate because they are extremely sold out, despite prices starting at $1,500. and whatThey want to see Messi on the pitch.

In the midst of the exchange of gifts following the signing of the agreement, the Chinese made it clear that, as had been the case since the signing of the first exchange, if a If the agreement with the IMF falls, this exchange of currencies also falls. We are members of the IMF, indicated.

At 9 in Buenos Aires, at 8 in Beijing, it was discovered that Sergio Massa was keeping up a Zoom meeting with your fund negotiation team, led by Leo Madcur. A few hours had already passed since the declarations of support for Argentina Juan González, Washington’s responsible for Latin America.

And several members of the entourage have assured that the minister I would travel the next 12 to Washington Though they haven’t risked it, they will come back with an alleged $10,000 million upfront. Of course, if there are indications that she would also wear T-shirts. Another piece of information that week will be May inflation.

As for the use of the yuan, that is the intention are used for imports to Chinese suppliers which, if paid in yuan, relieves BCRA reserves. This is no small matter given that the trade deficit with China reached 9,500 million dollars in 2022. In this way the BCRA opens yuan accounts and creates a futures market in the Chinese currency.

As for the use as The foreign exchange intervention mechanism, which would appear in the contract as explained here, was notable because it was not mentioned in the BCRA statement.

Today also “the extension procedure has begun” of the $5 billion (35 billion yuan) of free availability, to add another $5,000 millionthe central bank said in a statement. This expansion will take effect once the first tranche has been exhausted, again within the US$ 19,000 million package. They are dollars that can be used intervene in the foreign exchange market.

When the committee was asked if this agreement means that Argentina can do without the advance that is being negotiated with the IMF, the answer was forceful: “The China swap is linked to the agreement with the IMF, In no way can this negotiation be set aside,” they said in the Argentine delegation.

Sergio Massa and Miguel Pesce together with the head of the Central Bank of China after signing the swap renewal.  Photo Ministry of Economy

Sergio Massa and Miguel Pesce together with the head of the Central Bank of China after signing the swap renewal. Photo Ministry of Economy

Swap includes the exchange of currencies such as strengthening of international reserves. And its amount is established based on the country’s GDP, among other items. The use is basically in foreign trade.

As indicated by Economy, $1.4 billion in yuan has been used so far to import, but they were yuan that was in the reserves of the Central Bank, out of the exchange.

With a confidentiality agreement The interest rates charged on these loans are not known. Before the United States raised them, they were more expensive than loans from multilateral organizations, Now they would be up to 25% cheaper.​

The first agreement between the two central banks was established in 2009, when the president of the central bank in Argentina It was Martin Redrado. A second agreement was signed in 2014, renewed in 2017 and integrated at the end of 2018 with a supplementary agreement.

In 2020 Miguel Pesce renewed that exchange for three years, which is now extended until 2026. Massa commented briefly to the group of journalists following this tour: “We are closing deals that transcend government.”

The exchange with the yuan that expired in August and that an early renewal has now been obtained was the main reason for Massa’s tour of China.

Source: Clarin

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