Argentina agreed to expand the swap with China for 47 billion yuan (US$6.5 billion) freely available.
President Alberto Fernandez announced the expansion of the swap with China for 47 billion yuan, which is equivalent to US$6.5 billion freely available. The agreement was carried out after the meeting they held Miguel Pesce and his Chinese counterpart, Pan Gongsheng, just as Ámbito had anticipated.
According to sources knowledgeable in the matter explained to this medium, the swap extension has no impact on the International reserves, since those assets were always considered. But it does do so in what is known as net reserveswhich are those calculated by the market (those that the BCRA has to use immediately).
What is swap?
He swap is a currency exchange between two countries that acts as a contingent loan between central banks. In this case, The BCRA gives pesos to the People’s Bank of China (BPC), and the BPC gives yuan to the BCRA.
The swap with China has no cost while it is inactive. This loan from the People’s Republic of China originated in 2009 with 70 billion yuan (about $9.9 billion). However, its use was not freely available.
Now, to make it effective, the BCRA You must notify your Chinese counterpart, but keep in mind that activating it has a fee equivalent to a loan. The operation works as follows: if Argentina asks to use that money, it is agreed. the interest rate and exchange rate; after, pesos are issued and deposited in the Chinese central bankwhich -in turn- places yuan in the BCRA. This is a temporary exchange for terms of between one and three years.
One of the criticisms of economists of the last activation of the swap had to do with the fact that The rate that Argentina pays for yuan was not known.
Source: Ambito
