The relationship between Argentina and China has been growing stronger for fifteen years. Among the main axes of the partnership are growing trade, China’s investments and yuan-denominated financial support for Argentina’s Central Bank. During the pandemic, health cooperation has become an important pillar of the relationship.
Sabino Vaca Narvaja is Argentina’s ambassador to China, but in practice he also functions as a cabinet minister. His remit covers wide-ranging issues from managing Covid-19 vaccines and securing China's support for Argentina in multilateral fora, to facilitating investment.
At the end of 2019, Vaca Narvaja was appointed by the government as Special Representative for Trade and Investment Promotion at the Argentinian Embassy in China. A year later, he took over as ambassador. Previously, he created a China-Argentina cooperation programme. He has published two books on China.
In an exclusive interview with Diálogo Chino, Vaca Narvaja assesses the two countries’ relationship during the Covid-19 pandemic and anticipates a wave of new investments.
Diálogo Chino [DC]: Why didn't President Alberto Fernández make the planned visit to China in the first half of this year, even though he did make a European tour?
Sabino Vaca Narvaja [SVN]: The reason is that China has one of the strictest quarantines. These precautions allow it to be one of the safest countries with regard to contagion, but also prevent state visits, as almost no president or official can afford so many days of isolation. The invitation is still open but subject to health protocols.
DC: To what extent did the pandemic strengthen the Argentina-China relationship?
SVN: China was instrumental in helping our country in the most difficult moments of the pandemic. In 2020, Argentina purchased almost 1,500 tonnes of medical supplies from China to strengthen our health system at a time of global shortages. By July this year, 6 million doses of the Sinopharm vaccine were procured, along with another 24 million doses between July and September. Moreover, several districts are in the final stages of procuring vaccines from the Cansino Biologic Laboratory. The bond between the two countries is enjoying a great moment, which is also demonstrated by the fact that we have cooperated in various multilateral spaces, such as China's support in the United Nations Decolonisation Committee on our sovereignty claim over the Malvinas [/Falklands] Islands.
DC: What role is China playing in the renegotiation of the US$44 billion IMF loan that was granted to Argentina in 2018?
SVN: China has on numerous occasions conveyed support for Argentina's negotiations with the IMF. For China, this is fundamental because it contributes to the economic and financial stability of Argentina, which is a relevant partner. On the other hand, China has proved to be a key ally since the renewal of the second tranche of the currency swap for an amount close to US$8.5 billion. This was achieved thanks to the direct intervention of our current president and his Chinese counterpart, on a par with the renegotiation that the Argentinian economic team was carrying out with private creditors last year.
DC: Are there any investment projects under the comprehensive strategic partnership that are awaiting announcement on the presidential visit?
SVN: The state visit will be fundamental for the realisation of several projects that are part of the Integrated Five-Year Plan. These include the construction of our fourth nuclear power plant with Hualong technology, photovoltaic and wind farms, gas pipelines, thermal power plants, transmission lines and dams. There are also important projects linked to boosting our railway network for both freight and passenger transport and strengthening Pacific connectivity through bioceanic corridors. On the other hand, work is being done on the Vaca Muerta-Brazil natural gas pipeline project, with Chinese companies interested in investing.
Argentina must become more than a mere exporter of raw materials and it has enormous capacities to achieve this
China needs to guarantee food security for a population of around 1.4 billion, and Latin America has become a reliable supplier of food and minerals. However, Argentina must become more than a mere exporter of raw materials and it has enormous capacities to achieve this. We need to export more value-added products to China, making use of the Eastern partner's great financial and technological capacity. To do this, we need to attract investment by focusing that investment on infrastructure and the production of manufactured goods.
DC: What is the status of the project to build a fourth nuclear power plant in Argentina, in partnership with China?
the value of a loan from China's ICBC to finance the construction of a nuclear reactor (U$)
SVN: Work is well underway. The plant will use Hualong technology, one of the most advanced in the world, and will allow our country to continue diversifying its energy generation matrix and create around 7,000 direct jobs. The Chinese financial proposal led by the Industrial and Commercial Bank (ICBC) consists of financing 85% of the contract for the construction of the HPR-1000 reactor, offering a preferential interest rate compared to that offered by the market and a grace period equivalent to the duration of the project. It is a US$7.9 billion loan that starts to be repaid after 8 years, when the reactor starts generating power.
DC: Why was the idea of building a fifth plant with a CANDU reactor with heavy water and natural uranium, in which Argentina has a lot of experience, abandoned, and instead enriched uranium and light water, which is new for Argentina, prioritised?
SVN: In 2014 and 2015, agreements were signed for the construction of two nuclear power plants. On the one hand, a CANDU plant, which our country has been operating since 1984 in the province of Córdoba. On the other, a contract for the engineering, supply and construction of a Chinese-designed enriched uranium and light water technology nuclear reactor. However, the government of Mauricio Macri, hand in hand with an erratic foreign policy regarding collaboration with China in big infrastructure and energy investments, tainted the main, ongoing bilateral projects, starting with the attempt to paralyse the hydroelectric dams in the province of Santa Cruz and culminating with the cancellation of the CANDU nuclear power plant.
DC: How will the national nuclear industry be positioned in the current project?
SVN: Our country is making every effort to try to increase the national participation of 40% of the total amount of the contract that was agreed during the previous administration, while discussions continue on the conditions for the transfer of technology to manufacture nuclear fuel in the country. On the other hand, we are working on the possibility of reactivating the CANDU project. Opportunities for the Argentinian nuclear industry to provide services and components to extend the lives of the CANDU nuclear power plants operating in China are also being explored.
DC: How do you assess the criticism of the project to increase pork production in Argentina with Chinese investment?
SVN: Our region is free of African swine fever, classical swine fever and porcine reproductive respiratory syndrome. We also have first-class sanitary standards. As an example, Germany, which is the size of our province of Buenos Aires, produces 15 times more pork than us, so we have a lot of potential to develop the sector in a safe and sustainable way. The pork sector has export opportunities, not only to China but to the whole East Asian region. This is because there is a deficit of pork protein in the Asian market in general and in the Chinese market in particular as a consequence of African swine fever, which also affected main suppliers Spain and Germany.
DC: What does the plan consist of?
SVN: We’re working on a strategic plan, including incentives for the sector and specific credits to motivate potential Chinese investors. The increase in pork production would improve our export matrix as we would be adding value to exports. Today, we are selling maize and soy pellets to Germany and Chile so that they can export pigs to China. Pig farms are highly technological and could generate energy from waste. We’re studying the location of new plants and the expansion of existing ones throughout the country, with a federal perspective that includes small producers and contributes to regional economies.
DC: Recently, Ganfeng Lithium announced a US$600 million investment for the extraction of lithium in Salta Province. How would you characterise China's interest in lithium in Argentina?
SVN: Countries such as Peru, Brazil and Chile have a positive trade balance with China, basically as a result of the export of minerals and their derivatives. Argentina has enormous potential in the mining sector and in particular has some of the largest lithium reserves. If, in addition to exporting minerals, we add added value, for example by installing lithium battery or electric vehicle factories, we would be industrialising our minerals and advancing in strategic development. 80% of global lithium production will be destined for electromobility and this type of comprehensive agreement with China allows us to anticipate that demand. Argentina is in a position to be competitive in the global lithium market.
DC: The improvement in commodity prices had a positive impact on Argentina through foreign currency inflows but it also put more pressure on inflation and the government introduced restrictions on beef exports. What impact are the restrictions having on shipments to China?
SVN: In the last few years we have seen a huge growth in beef exports, making us China's second largest supplier after Brazil. A high percentage of the cuts demanded by China have a low level of consumption by Argentinians, as is the case of the shank and shin. We hope that the export agreement will allow us to find a balance between the internal and external markets, maintaining our position as a meat supplier to China.