Argentina in talks with China on $10.4b swap extension: official

Argentina is in discussions with China about extending a currency-swap program due to recent financial turmoil, Cabinet Chief Marcos Pena said on Wednesday.

“There are talks ... to see if there’s a possibility of extending the swaps in the current situation,” he said.

He said that Argentina’s relationship with China has been “very fruitful.” China’s central bank last year extended a bilateral swap agreement for 70 billion yuan ($10.37 billion) for another three years.

Argentina’s former president Cristina Fernandez first signed a swap pact with China in 2009 to boosting dwindling reserves that the South American country relied on to pay for energy imports and cover debt obligations.

A second agreement was signed in 2014. The previous swaps allowed Argentina to bolster foreign reserves or pay for Chinese imports with the yuan.

Reserves have risen to nearly $50 billion from $24.9 billion on December 10, 2015, when President Mauricio Macri took office promising to end Argentina’s financial isolation with free-market reforms.

Still, the central bank sold $10 billion of reserves so far this year trying to stem a weakening peso.

Investors grew sour on Argentina in late April when higher US interest rates caused an exodus from emerging markets. Argentina is negotiating a credit line with the IMF to guarantee funding through 2019.

The central bank last month offered to swap Lebacs for paper of longer duration. The popular, high-yielding securities have forced the bank to take a hard blow each month to its reserves.

“We understand that that is a situation that has some vulnerability that should be reduced,” Pena said.