behind the scenes of the swap expansion

behind the scenes of the swap expansion

At 9:30 p.m. on Friday in Beijing, Chinathe Minister of Economy Sergio Massa He got up from his chair on the lawn of the St. Regis Hotel and said goodbye saying: “In fifteen minutes I have a video call related to the International Monetary Fund ”. He took the last puff of his cigarette and went directly to the Argentine Embassy in China.

The signature was put by the president of the BCRA, Miguel Pesce, and the statement reads as follows: “the early renewal of the SWAP was signed for 130 billion yuan ($19 billion) for a term of three years. Also started the procedure for extending the amount of use for another 35 billion yuan (US$5 billion), which will be operated once the first use is exhausted. In this way, the capacity of use is increased from 35,000 million RMB (Renminbi) to 70,000 million RMB.” The deal was closed with the People’s Bank of China (PBoC) at the Beijing headquarters.

The objectives are as clear as the needs: both comprehensively enrich its relationship with Chinawhich promises to be auspicious but lacks maturity, such as finding macro stability in the midst of the exchange and financial difficulties generated by the low entry of dollars into the country. “For the 40% of the drought we are experiencing, Macri turned to the IMF”commented an official yesterday.


Regarding the multilateral organization, the loan repeats the same condition established in 2020: fulfill the agreement with the IMF to guarantee it. “China is the third most important country in taxation in the Fund, and it is always fighting to expand its place, since it alleges that the organization does not recognize it sufficiently in the distribution of quotas. So, It is also not convenient for a country with debt like Argentina’s not to pay, it loses money at some point “, tells a former official who accompanied Martín Guzmán in the negotiation with the IMF. Paradoxically, he highlights: “in geopolitical matters, here we talk about dollarization, I respond with world yuanization, especially in Latin American countries. This is one more step in that direction.”

As far as technical details are concerned, from the BCRA they keep funeral silence especially in the cost of the interest rate applied after activating the loan. For reasons of “confidentiality”, they only share that the agreement between both central banks takes the shibor rate as a reference and that it is “notably lower” than that of the IMF, World Bank, Inter-American Development Bank (IDB) and CAF. It is also known that the renewal of the SWAP motivates the activation of the future market and spot of yuan, which “would generate a greater traffic of the currency, more than what was entered by trade”, they say from Beijing.

The capital of China is made up of superb dimensions and wide avenues fully co-opted by car and motorcycle drivers who then risk their lives at an intersection. However, those who understand diplomacy assure that Massa did not see any of that: since he arrived, his treatment is “presidential.” As he commutes, a fleet of security surrounds him as he speeds by because traffic is cleared for him. At the door of his room, a person is always waiting for him: a custodian who protects his steps through the city of the Great Wall.

Regarding the use of freely available resources, foreign trade operations may be financedthe preferred share of the Chinese government, but it will also be able to intervene in the market by buying dollars with yuan, if necessary. “For each yuan used, priority is given to talking to the dollar,” reasons as a general premise a very tall fountain in the hotel garden. In fact, they assure from the BCRA and the Ministry of Economy, that for contractual reasons they can make the conversion to any currency.

As the US$5 billion arranged from the SWAP -2020 version- are kept within an account in the BCRA, the People’s Bank of China sets as a condition “not to misuse” the current amount if it is necessary to disburse the next recently insured, also of US$5 billion. First one, it ends, then the other.

About, the Government recounted the valuation made by the Chinese bank itself: “they recognized that, when the possibility of intervening with yuan appeared, trade was protected”. Within this framework, the approval of Chinese imports is advancing. They detailed that There are already US$1.47 billion in SIRAs approved. However, a source that closely follows the approval of the SIRAs warns that they should continue to oil the approval mechanism, because “Chinese suppliers have the same problem as Argentine ones: if they don’t know when they are going to pay them, then they will also be discouraged from trading.”

Those who do not lose their breath are officials who visited Massa during the week. Not only did he give them each an Argentina jersey, blessed by the third cup, but he also promised them tickets for July 15, where the country will play a friendly against Australia at the People’s Stadium in Beijing, with Messi present. The fury, they say in the entourage, is total. They also ensured that Chiqui Tapia You are already aware of the new mission.

Source: Ambito

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