“I would not base a strategy unidirectionally with any country in that sense, neither for them to rescue you from one side or the other. I am of the idea that we have to close with the Fund, but in the best way”, he added in the interview. “China has always supported our position. In the meetings that I had and in the dialogues that Minister Guzmán has had, he has always supported the negotiation with the Fund,” said Vaca Narvaja.
But what role do swaps play in Central Bank reserves? the swaps are considered liabilities in the equivalent of US$20,477. From the BCRA’s balance sheet it can be deduced that gross reserves are made up mainly of 2 items: firstly, Foreign Currency (deposits in current accounts in international financial entities) and, secondly, Placements in foreign currency (deposits in savings accounts, fixed terms and foreign public securities). It also follows that swaps are not part of the Central Bank’s assets, and that in 2020 they were not used to generate liquidity in dollars that was later integrated as part of international reserves.
Swaps with the Bank of the People’s Republic of China are not computed as net reserves, despite the fact that recently there has been talk of the possibility of expanding it to guarantee the sustainability of the current exchange scheme.
Can Argentina use swaps?
The accounting of the Chinese swap in net reserves is very relevant for the formation of expectations. It would imply less pressure on the availability of foreign currency to pay for imports, among other things, because it allows purchases to be canceled from the Asian country. In 2020, Xi Jimping clarified to President Alberto Fernández that swaps can only be used by changing to yuan, without going through the dollar. Or eventually euros, but in a minimal amount. The Central Bank of the Republic of China made it clear that it wants to take care of its currency, and that it does not want operations that show a subordination of the Chinese currency to the American one. Unless the exchange market shows the true value of the yuan against the dollar, at least for the Western world.
Argentina would then be forced not to be able to automatically convert the yuan of the reserves into dollars. It should opt for two paths: a triangulation through the international markets authorized by China or concentrating on the commercial market with the Eastern country.
On Friday, the Central Bank was able to buy foreign currency for the first time in eight days, after accumulating a net loss of US$140 million in the previous rounds.
At the end of the interview, Vaca Narvaja also anticipated that they will give “good news” regarding the swap. “I leave that to Miguel Pesce, but we will have good news about it. I just want to highlight something that was achieved and that was very important: that Argentina was allowed to start paying for vaccines in yuan. The last 20 million doses of Sinopharm were at a very significant discount and that was also the product of very hard work that Pesce began to do after the swap and we helped him with the People’s Bank of China, “he said.
Source From: Ambito
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