Argentina will pay for Chinese goods in yuan rather than US dollars, according to Economy Minister Sergio Massa, in order to protect the country’s diminishing foreign reserves. The South American country will be able to “program a volume of imports in yuan worth (the equivalent of) more than $1 billion from next month,” Massa said during a meeting with China’s ambassador, Zou Xiaoli, in Buenos Aires.
This would “replace” Argentina’s usage of its US currency reserves. Argentina’s government accused the country’s rightwing opposition on Tuesday of causing a sharp decline in the peso’s value versus the dollar and requested an investigation. The official exchange rate for the peso was 227 to the dollar on Tuesday, but it hit more than double that on the parallel “blue” market.
The decline began last week, following several days of pressure on the peso at a moment of pre-election anxiety in a country with exchange restrictions in place to mitigate the consequences of a financial crisis and year-on-year inflation of more than 100 percent. According to economist Maria Castiglioni, the devaluation was caused in part by Argentines seeking “refuge” in the US dollar to protect their purchasing power.
Massa stated that paying in yuan “improves the perspective of Argentina’s net reserves.” It also “allows us to maintain the level of activity, the volume of imports, the pace of trade between Argentina and China, and the levels of economic functioning that Argentina needs” in the aftermath of a terrible year for local agriculture and hence exports due to persistent drought.