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China’s ambitions in Latin America: a growing foothold in Argentina

By Nathalie Heidema

As the Argentinian-Chinese bilateral relations have deepened over the past years, it has also been reflected on three levels of cooperation: economic, political, and strategic. In 2020, for the first time in history, China became Argentina’s first business and trading partner, surpassing the long-standing number one - Brazil. China has become so important to the Southern Cone country that its national newspaper Noticias called the relation “ArgenChina, new carnal relations, an expression only once used in regards to the US. Amidst the heightened socio-economic crisis aggravated by the pandemic, China is offering more carrots than sticks to Argentina – yet the underlying incentives go beyond economic influence.

On Economic Cooperation

The asymmetry between the Chinese-Argentinian global economic powers has been strengthened by the Covid-19 pandemic. Between 2020 and 2021, Chinese exports to Argentina increased by 78%, which has been significantly influenced by augmented exports of vaccines and other medical supplies. On the other hand, Argentinian exports (mainly soybeans and beef) have decreased by 15%. Nonetheless, Argentina is still China’s largest producer of soy and wheat. Moreover, China is also producing pork meat on a large scale on Argentinian territory, destined specifically to the Asian market.

Chinese investments in Latin American and Caribbean (LAC) countries have been diversified from mostly financial acquisitions to specific public-private partnerships (PPPs). Already in 2009, when Argentina was facing rampant inflation and recession, China stepped in with a $10.2 billion currency swap to stabilize the Argentinian peso, including another $10 billion to fix the country’s deteriorated rail system. As of 2020, Argentina has advanced investment agreements with China of approximately $30 billion dollars. Chinese presence in Argentina’s mining sector has also significantly increased in recent years, especially due to the great interest of China in strategic lithium, critical for the manufacture of batteries for electronics.

Argentina joined the Asian Infrastructure Investment Bank in March 2021, and also firmly declared its interest in joining China’s Belt and Road Initiative (BRI). However, it would be difficult for Argentina to get into the BRI due to its macroeconomic instability and heavy indebtedness, which sums up to $44 billion to the US-based International Monetary Fund (IMF). Argentina thus needs to strike a balance between its largest creditor – the US; and China – that promises to mitigate the fiscal gap. If Argentina would manage to join the BRI, this would further unlock Chinese financing and investments in infrastructure, transport, energy, mining, agriculture, innovation, and information technology.

The Argentinian president Alberto Fernández expects to reactivate the controversial Chinese-funded projects of hydroelectric dams in Patagonia, which were paralyzed during the previous government. Fernández considers these “the most important infrastructure construction work in the country” and a linchpin of the Chinese-Argentinian cooperation, as it will be 85% financed by the China Development Bank. Chinese investments in hydroelectric dams would serve as a gateway for a broader range of infrastructure projects in Argentina, such as the nuclear power plant in Buenos Aires, whose construction will start next year.

On the Politico-Strategic Cooperation

The mentioned infrastructure investments have meant that at the political level, China now holds a more prominent role in its strategic relations with Argentina. Their “comprehensive strategic alliance,” a diplomatic status enjoyed by a few countries, has resulted in more than 20 bilateral treaties in different sectors. The Chinese government is also working on four projects of geopolitical sensitivity, as they imply the control of air and water spaces monitored by Beijing. Most recently, the pandemic has brought Fernández and Xi even closer as millions of doses of Chinese Sinopharm have been delivered, while Argentina also approved additional 5.4 million of the single-dose Cansino vaccines.

As for telecommunications, the Chinese firm Huawei has operated in Argentina since 2001 and it is also the major infrastructure supplier to Argentina’s three major telecom providers. As Huawei is in close dialogue with the government, it is likely that it will become the supplier of choice when Argentina builds a 5G network, expected for 2022. More interestingly, Huawei proposed to build “smart city” infrastructures in Argentina, which aims to export Chinese surveillance system technologies to Latin America. In 2019, Argentina`s province of Jujuy sealed a $30 million contract with the Chinese telecoms giant ZTE, to install a system of cameras with facial recognition and other sensors. Jujuy also happens to be the location of important Chinese mining and power generation operations.

On the latest G20 summit that took place this October, China’s Foreign Minister Wang Yi emphasized that next year will be the 50th anniversary of the establishment of diplomatic ties with Argentina. China is eager to host the Year of China-Argentina Friendship and Cooperation and create brighter prospects in their bilateral relations. Furthermore, China appreciates Argentina’s active response to the joint building of the BRI and is willing to sign the Memorandum of Understanding on cooperation as soon as possible. Having Argentina as a BRI member would undoubtedly be a great boost for the trade flows between the regions, however, Argentina finds itself in an uneasy position. The state-owned China Communications Construction Company (CCCC), which is the largest BRI infrastructure contractor, has been accused of corruption and expansionist agenda by the US, and sanctions thereagainst have already been issued. At the same time, Argentina is in the process of renegotiating its $44 billion debt with the IMF, in which the US could have an influential role, and thus postponing Argentina’s participation in the BRI.

A Space Station in Patagonia?

Argentina's rapprochement with China goes beyond economic cooperation. China has built a satellite and space mission control station in the Argentine province of Neuquén, in Patagonia. The bilateral negotiations ensued in secret, but it has been agreed not to use the base for military purposes. Nonetheless, US experts are concerned about China’s intelligence-gathering capabilities and other strategic uses of their technology.

The Chinese space station in Patagonia [The New York Times]

The station began operating as of March 2018, and it is a remarkable symbol of Beijing’s growing strategic influence in the LAC region. With Argentina’s support, China is planning an expedition to the far side of the Moon, which never faces the Earth. The Neuquén province gave China the right to the land for 50 years, for free.

A helping influence

When the whole world was swirled in the financial crisis of 2008, it was China who came to LAC to make trade deals and save the region from the worst economic damage. Even as Latin America has shifted more to the political right in recent years, its governments have continuously tailored their policies to appeal to Beijing. It is clear that China's idea of developing infrastructure projects, deploying 5G technology, and installing strategic (space) stations openly competes with Washington’s (and Europe’s) ambitions. China’s role as a central player is already established, it now remains to be seen to what extent will the US and Europe further undermine their strategic position in Argentina and the wider LAC region.

2021-12-17 China-Argentina - Nathalie1
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About the author: Nathalie Heidema

Nathalie is passionate about the EU external policy, international cooperation, and security, specializing in the Latin American and East European region. She holds a double Master degree in Political Science and East European Affairs. Coming from a bi-cultural background, she is eager in bridging the gap between the divided East & West, and thus being an avid mediator. She has field experience from both Latin America (Mercosur) and Eastern Europe. Nathalie now works for the EU Delegation to the UN. Her experience is mainly in the field of economics, environment, and other development programs.

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