Argentina to pay for Chinese imports in yuan instead of dollars

BEIJING (AFP): Argentina will pay for Chinese imports in yuan instead of US dollars in order to preserve its dwindling foreign reserves, Economy Minister Sergio Massa said on Wednesday.

The South American country will be able to “program a volume of imports in yuan worth (the equivalent of) more than $1 billion from next month,” Massa said at a meeting in Buenos Aires with China’s ambassador Zou Xiaoli.

This would “replace” the use of Argentina’s US dollar reserves.

Argentina’s government on Tuesday accused the country’s rightwing opposition of fueling a dramatic erosion of the peso against the dollar, and ordered an investigation.

The peso stood at 227 to the dollar at the official exchange rate Tuesday, but reaching more than double that on the parallel “blue” market.

The slide started last week after several days of pressure on the peso in a period of pre-election uncertainty in a country with exchange controls in place to limit the effects of a financial crisis and rampant inflation of more than 100 percent year-on-year.

Economist Maria Castiglioni told the TN broadcaster the devaluation was partly the result of Argentines seeking “refuge” in the US dollar to protect their purchasing power.

Massa said the decision to pay in yuan “improves the perspective of Argentina’s net reserves.”

It also “allows us to maintain the level of activity, the volume of imports, the pace of trade between Argentina and China and the levels of economic functioning that Argentina needs” following a poor year for domestic agriculture, and thus exports, amid persistent drought.