Following a bilateral meeting between presidents Alberto Fernández and Xi Jinping on 6 February, Argentina has agreed to join the Belt and Road Initiative (BRI) – China’s flagship global infrastructure development programme, which seeks to build trade and new political and economic ties with participating nations.
After signing a memorandum of understanding at the meeting in Beijing, Argentina becomes the 21st country from Latin America and the Caribbean to join the BRI, which launched in 2013 and first extended into the region in 2017. It is also the largest Latin American economy to join so far, with the accession of other major economies in the region, such as Brazil and Mexico, still pending.
Trade between Latin America and China has increased significantly in the last decade, with its total value reaching a new peak of US$450 billion in 2021. At the same time, countries in the region have signed hundreds of agreements with China and worked on dozens of energy, transport and infrastructure projects.
Argentina has been no exception, having significantly deepened relations with China since the government of former president Cristina Fernández de Kirchner (2007–2015). The incumbent Alberto Fernández has maintained this closeness since taking office in 2019, finding in China an ally during the Covid-19 pandemic and severe economic crisis.
Along with Russia – which was the first stop on Alberto Fernández’s current trip – China has been one of Argentina’s main suppliers of vaccines and medical equipment. In addition, thanks to currency swaps between their central banks, China helped to increase Argentina’s international reserves.
As the countries enter a new era of their relationship, experts are welcoming an expected growth in investment, but say benefits must be shared. “For Argentina, the signing could mean the promotion of three core sectors: transport, energy and communications,” said Jorge Malena, director of the Asian affairs committee of the Argentine Council for International Relations (CARI). “It will be essential that the partners agree on projects that are favourable to both countries.”
Visit and agreement with China
Alberto Fernández’s visit to Beijing comes ahead of the 50th anniversary of Argentina and China establishing diplomatic relations, as well as coinciding with the opening of the 2022 Winter Olympics in Beijing. The possibility of the trip had been mentioned by the government in 2021, but had ultimately been delayed due to the pandemic.
This year, Argentina assumed the pro tempore presidency of the Community of Latin American and Caribbean States (CELAC), China’s main diplomatic avenue in Latin America. This gives Alberto Fernández’s visit even greater symbolic weight, several experts told Diálogo Chino.
“Alberto Fernández holds the presidency of CELAC, which is strategic for China. In addition, he has decided to go to Beijing in the context of a geopolitical battle with the United States and their [diplomatic] boycott of the Olympic Games,” said Ariel Slipak, an Argentine economist and researcher who studies China–Argentina relations. “The visit will also serve to reactivate many delayed infrastructure projects.”
China’s Ministry of Foreign Affairs (MFA) confirmed Argentina’s accession to the BRI in a official statement, adding that this will ensure the implementation of investment projects and deepen cooperation in areas such as agriculture, energy, mining and infrastructure, all within a context of green development.
The MFA release says Alberto Fernández thanked China for its support with medical supplies and vaccines during the pandemic, while Xi Jinping highlighted his desire to help Argentina expand its exports and industries. “Over the past five decades, the two countries have always provided each other with mutual understanding and support,” Xi said.
In practice, China has granted close relations to many countries beyond those who have signed to the Belt and Road
Guo Cunhai, coordinator of the Beijing-based Centre for China and Latin America Studies (CECLA), said that Alberto Fernández’s visit demonstrates support for China, and will serve to deepen the strategic relationship between the two countries. He points, in particular, to agriculture, digital economy, climate change and energy as areas that may see strengthening cooperation.
For Latin American countries that have already signed up to the Belt and Road, closer ties with China were supposed to bring funding for energy, roads and ports, among other benefits. However, this has not always necessarily been the case, as Margaret Myers, director of the Inter-American Dialogue’s Asia and Latin America Program has pointed out. Chinese funding in the region has also dwindled in recent years.
Myers argues that, in any case, countries of strategic interest to China have received investment regardless of whether or not they have signed up to the BRI. Such has been the case with Brazil and Colombia, for example, which have as yet not signed up.
“China has sought the support of Latin American countries for the Belt and Road, its main tool for international relations. But in practice it has granted close relations to many countries beyond those who have signed,” Myers told Diálogo Chino. She added, however, that “this does not detract from the significance of Argentina’s decision.”
New and old projects
Alberto Fernández’s trip came shortly after reaching an agreement in principle with the International Monetary Fund (IMF) on Argentina’s US$44 billion debt. The country has seen limited financing for infrastructure projects in recent years due to its sovereign debt crisis, which has been renegotiated several times. Amid this background of debt renegotiations, the BRI agreement with China “is a sign of the possibilities for Argentina to get alternative financing”, according to Slipak.
On Twitter, the Argentine president claimed that joining the Belt and Road will mean US$23 billion in Chinese investment – a figure not mentioned by China in its statement. More than half of this financing corresponds to projects already approved, while the rest will be requested by Argentina in the near future.
“Today we have the opportunity to promote foreign direct investment from your country [China], to expand the participation of Argentine suppliers in infrastructure works and speed up sanitary and phytosanitary negotiations and authorisations to stimulate exports to China,” Alberto Fernández continued.
Prior to the trip, the state-owned energy company Nucleoeléctrica Argentina and the China National Nuclear Corporation (CNNC) signed a contract for the construction of a fourth nuclear power plant in Argentina, Atucha III, which will be 85% financed by Chinese banks, with CNNC providing the technology for the plant’s development.
Also prior to the trip, the Argentine ambassador to China, Sabino Vaca Narvaja, agreed a new financial framework to restart work on the controversial Santa Cruz dams with the president of China Energy Engineering Corporation (CEEC). In July 2021, the grace period for Argentina to start repaying the loan maturities for the project to Chinese banks expired.
In addition to government-level agreements, Chinese companies have also announced investments. China’s Zijin Mining will invest US$380 million to build a lithium carbonate plant in Catamarca province, while China Electric Power Equipment and Technology (CET) will invest US$1.1 billion in the Buenos Aires power grid.
Along with Fernández, Ecuador’s President Guillermo Lasso also visited China last week and agreed to begin negotiating a free trade agreement between the two countries. The Ecuadorian delegation also discussed the nation’s debt with Chinese banks and the possibility of extending payment terms.