New Argentina president looks set to deepen China ties

Fernández’s outright victory in Sunday’s election could reactivate controversial China-backed projects as new president eyes ‘mature’ relationship

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Argentina's ties with China look set to improve under president-elect Alberto Fernández

Argentina’s relations with China look set to improve under president-elect Alberto Fernández but his tenure could see controversial dams and nuclear projects advance (image: MAICOP Salamanca)

Following four years of back-and-forth over their relationship, Argentina could soon renew diplomatic bonds with China when left-wing Alberto Fernández takes over the presidency on December 10.

The Peronist candidate won last weekend’s elections with 48% of the votes in the first round, avoiding a run-off and ending President Mauricio Macri’s slim hopes of reelection. Former president Cristina Fernández de Kirchner (no relation) ran as vice-president alongside Fernández.

Argentina is on the verge of a new sovereign default, which likely impacted Macri’s less than 40% vote share. The country has soaring debt, including to the International Monetary Fund (IMF), which is deeply unpopular in the country following a 2001 default, and closer ties with China, an important creditor, appear on the horizon.

45%

the vote share needed by presidential candidates in Argentina to avoid a second round

“Argentina will likely see deeper ties with China under a Fernández administration,” said Sergio Cesarin, coordinator of the Centre for Asia-Pacific and India Studies (CEAPI) at the Universidad Tres de Febrero. “Chinese projects questioned by Macri will now be reactivated.”

Under Fernández de Kircher’s second term (2011-2015), Argentina signed 20 cooperation treaties and agreed a number of finance packages for Chinese-built infrastructure projects, including a controversial nuclear complex and two major dams.

Macri expressed concern over the deals, although he ultimately declined to cancel them.

Hints at Fernández’s policies

Although Fernández has given very few clues over his diplomacy, he has referenced China frequently. He suggested that Macri didn’t appreciate China’s role as a reliable foreign investor and told the IMF he would lean on China if they weren’t more flexible on debt repayment.

Fernández already met with Zou Xiaoli, China’s ambassador in Argentina, during the presidential campaign and some key foreign policy advisors, such as Jorge Arguello and Jorge Taiana, recently visited the Chinese embassy in Buenos Aires.

Following the election, Geng Shuang, a spokesperson for China’s Foreign Ministry, briefly congratulated Fernández for his victory, claiming they value the ties with Argentina and will work for a “stable progress” in the relationship. China’s President Xi Xinping also sent a letter to congratulate Fernández.

Rafael Gentili, president of the progressive Laboratorio de Políticas Públicas (LPP) think-tank, believes that the relationship between the new government and China will be both “tight” and “discrete”.

Argentina has a comprehensive strategic alliance with China, a diplomatic status the latter confers only on a few countries.

Fernández will seek a mature relationship with China and the US, seeking to get the best he can from both countries

The country has also benefited from a US$19 billion currency swap with China, which helped bolster Central Bank foreign currency reserves that have dropped by US$28 billion in the past six months. A first part of the swap came under Fernández de Kirchner. Macri agreed an extension.

Macri’s review of the China-backed dams in Patagonia and a nuclear power plants in Buenos Aires led to some changes and the projects downsized. Even after the moves, they are still awaiting confirmation.

Now, experts believe the projects, which environmental and energy experts questioned, could be boosted under Fernández. Nevertheless, China will not necessarily be the main focus of Argentina’s foreign relations, as the country hopes for good terms with other international creditors.

“Fernández will seek a mature relationship with China and the US, seeking to get the best he can from both countries. If China wants to invest and provide funding, then great. The need will prevail over the ideology,” Marcelo Elizondo, a trade expert at consultancy DNI, said.

Wang Ping, a professor at Nankai University, wrote in a blog that Macri’s failed policies had led to disillusionment with the ‘neoliberal’ model in Argentina and advocated a guided state intervention in the economy.

Shanghai-based The Paper published a commentary expressing concern about Argentina’s economic development and claimed prior to the elections that whatever the outcome, it would be unlikely to resolve the crisis.

Meanwhile, the People’s Daily said it believed that although Fernández faced many challenges, his policies were “arousing expectations”.

The role of Mercosur

As well as a new government in Argentina, Uruguay will also choose a new president in a second-round contest next month. Political changes in the region will likely have consequences for the Mercosur common market, whose permanent members are Brazil, Argentina, Uruguay and Paraguay, and the bloc’s relationship with China.

Over the past few years, Uruguay has pushed for a free trade agreement between Mercosur and China, although the former has not yet fully considered this internally. The country hosted a China-Mercosur summit last year in Montevideo and put a potential deal on the top of the discussion agenda.

it won’t make sense for him to embrace a free trade agreement with China, either with Mercosur or bilaterally

Uruguay has also discussed the possibility of signing a bilateral trade deal with China, something not allowed under Mercosur rules. This interest is shared by China, mentioning on its 2016 framework document regarding Latin America its desire to “explore the bilateral commercial potential.”

Ignacio Bartesaghi, dean of the Faculty of Business Studies at the Catholic University of Uruguay, said Fernández will likely have a more protectionist economic policy, which would change the dynamics of Mercosur and create tensions between Argentina and the rest of the bloc.

$12billion

the value of Argentina-Brazil trade so far this year (US$)

Such tensions are already visible. Brazilian President Jair Bolsonaro said he wouldn’t congratulate Fernández for his recent victory and threatened to leave Mercosur if Argentina doesn’t pursue Macri’s open-market approach. Argentina and Brazil share strong trade links, worth US$12 billion so far this year.

Brazil will host the bloc’s next summit in early December, before Fernández takes office. The key issue will be Bolsonaro’s proposal to slash tariffs for over 10,000 products imported by member countries, an idea Fernández is likely to challenge.

“Fernández will likely have a more industrialist policy so it won’t make sense for him to embrace a free trade agreement with China, either with Mercosur or bilaterally,” said Julieta Zelicovich, an international relations expert.

“I don’t see a Mercosur-China trade deal on the horizon.”