Argentine President Alberto Fernandez paid a visit to the Peoples’ Republic of China (PRC) in the backdrop of the Olympics for enhancing relations between both the nations. The important outcome of the meeting was Argentina’s official inclusion into the Belt and Road Initiative (BRI) and a statement by the PRC that backed the claims of Argentina over the disputed Falklands Islands[i] (Islas Malvinas) which clearly irked the United Kingdom (UK). Driven by financial difficulties particularly with respect to debt servicing and recovering from the impact of the pandemic on the economy are some major reasons for Argentina’s growing proximity to the PRC. Argentina seeks to build partnerships that will help in its economic recovery. Beijing is emerging as one of the leading partners with a view to gain a larger strategic depth in Latin America. This paper examines Argentina-PRC relations in the context of economic partnership and political relationship.
Argentina’s approach to the PRC- Relations are warm between both the states since the establishment of diplomatic relations in 1972. Argentina became a strategic partner of the PRC in 2004, the status being elevated to a Comprehensive Strategic Partner in 2014[ii]. Former Argentine President Cristina Fernandez de Kirchner was particularly keen on engaging with the PRC in the context of trade and investment. From 2007-2015 both the states took major steps to increase trade, commercial activities and enhance cooperation in other fields[iii]. The Kirchner administration signed 20 major deals with the PRC which gradually enabled a substantial role for the latter[iv]. Under the Presidency of Mauricio Macri, the bilateral ties witnessed certain hiccups, nevertheless it remained robust. The October 2019 elections were contested when a threat of a sovereign default loomed large which had the potential to deepen the already existing financial crisis. The assumption of office by Alberto Fernandez in the 2019 elections signalled a deeper Argentina-PRC relation, as the incumbent President took a divergent approach from his predecessor keeping in mind the economic situation as the focal point. As the government cautiously deals with the IMF regarding its debt restructuring, proximity with the PRC is expected especially under the presidency of Alberto Fernandez.
Deepening economic and defence ties- The main reason for Argentina’s proximity with the PRC can be explained by its economic necessities. It suffered a major economic setback in 2001[v] over a loan default leaving it with little options than to look towards Beijing as an alternative to capital. In the same year bilateral trade between both the states crossed the billion dollar mark. It is widely believed that trade with the PRC during this period was beneficial to Buenos Aires. Further economic crises as late as in 2018 and 2019 severely depleted monetary reserves, and a devalued currency aggravated it. As the need for investments, technology and access to international markets increased, the PRC turned out to be an unswerving partner even surpassing Brazil as its largest trade partner in 2020. A currency swap deal[vi] with Beijing signed in 2011 and expanded recently also aids Argentina as it makes payments far easier.
Bilateral trade stands at US$ 16 billion[vii] with Argentina facing a negative trade balance. Main exports from Argentina are meat, processed food, sorghum, chemicals, soy and other agricultural products, minerals and consumer goods. Chinese exports are mainly electronic goods, broadcasting equipment, motorcycles and organo-inorganic chemical compounds. Chinese investments are mostly concentrated in railways, hydroelectric dams, mineral extraction, renewable energy, infrastructure projects, refineries and farming. Lithium extraction is a particular interest for Beijing as it seeks to cope up to the growing demand of the rare earth mineral. It has already invested US $ 380 million in the Tres Quebradas project[viii] in Catamarca and addition to Gangfeng Lithium’s projects in this sector. It recently signed a US $ 8billion deal for the Atucha III nuclear power plant using its indigenous Hualong I technology. A Chinese space station in the Neuquén province in Patagonia present since 2015 is a long term geostrategic investment.
Furthermore, the PRC also aids in modernising its military[ix], a requirement that is urgent. Particularly, the air force needs fighter planes[x] urgently and due to a UK imposed arms embargo, it has no other options but to acquire them from Beijing. There has also been a steady inflow of much required FDI which is over 30 billion U.S. dollars, while the BRI will enable Argentina to receive US $23.7 billion[xi] in terms of various investments, thus cementing their relations further. It may also prove to be a setback for the Build Back Better World (B3W)[xii] initiative, which is an alternative to the BRI. The B3W initiative launched in June 2021 by the G7 states seeks to facilitate lower and middle income states in terms of augmenting finance for infrastructure and development. Under this initiative, Latin America finds a special mention with a view to counter the PRC’s growing influence in the region.
Chinese investments and lending are critical for Buenos Aires, though Washington has repeatedly advised caution. Chinese aid during the pandemic also witnessed greater evolving ties between the two nations, especially when the economy witnessed a contraction and the health infrastructure could not cope up. It seeks to diversify its export portfolio and explore the vast market for its value added goods. Over reliance on the IMF and the inability to access credit limits its options hence, Chinese credit seems beneficial[xiii]. The outreach towards the PRC is a lucrative alternative for Argentina, as it allows greater economic manoeuvrability[xiv].
The PRC’s statement on the Falklands dispute
The endorsement issued by the PRC in favour of Argentina regarding the said dispute was not surprising, in the context of growing bilateral relations between the two states. The PRC’s support for Argentina regarding the Falklands dispute is a note of reciprocity for its adherence to the ‘One China’ principle. Beijing’s position regarding the dispute is consistent with an aim to project its outreach and power as a counterweight to the United States in Latin America by unequivocally backing Argentina. The PRC’s position regarding the Falklands dispute comes at such a time when there is a sharp divide between the Western powers and Beijing, and it can also be observed as a counter to the Western position on Hong Kong, Taiwan and the South China Sea[xv].For Buenos Aires, the statement by the PRC is a welcome one as it seeks to highlight the Falklands dispute internationally. These islands form an important part of the Argentinean national psyche[xvi] and the Constitution of the nation espouses recovery of the Islands through peaceful and diplomatic means[xvii]. In this regard, the PRC’s diplomatic support will be viewed warmly by the Argentine administration.
As Argentina grapples with economic crisis which includes a post-pandemic recovery and debt restructuring, its growing relationship with the PRC is quite significant. Buenos Aires welcomes Chinese investments and looks forward to economic engagement, thus reducing its dependency on the West. The PRC on the other hand seeks to strengthen its relationship with an important strategic partner while getting involved in a territorial dispute away from its vicinity exhibiting a quest for power projection.
*Dr. Arnab Chakrabarty is a Research Fellow at the Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.
[i] In 1982 Argentina and UK fought a 74 day war in which the former was defeated. UK regained control of the islands despite protests from Argentina. A 2013 referendum resulted in an overwhelming support for the status quo.
[ii] Evan Ellis (February 11th 2021). New Directions in the deepening Chinese-Argentine engagement. https://theglobalamericans.org/2021/02/new-directions-in-the-deepening-chinese-argentine-engagement/. Accessed 14th February 2022.
[iii] Unidad Ciudadana (4th February 2015). Cristina con Xi Jingping, ratifico la Alianza Argentina-China. https://www.cfkargentina.com/discurso-de-la-presidenta-cristina-kirchner-al-termino-de-la-firma-de-acuerdos-bilaterales-con-la-republica-popular-china/ Accessed 14th February 2022.
[iv] Unidad Ciudadana (7th January 2015). Represas de Santa Cruz: ¿a quiénes les molesta la alianza Argentina-China? https://www.cfkargentina.com/represas-de-santa-cruz-a-quienes-les-molesta-la-alianza-argentina-china/ Accessed 14th February 2022.
[v] Fermín Koop (October 31st 2019). New Argentinean President looks set to deepen China Ties. https://dialogochino.net/en/trade-investment/31387-new-argentina-president-looks-set-to-deepen-china-ties/. Accessed 14th February 2022.
[vi] Javier Lewkowicz (23rd July 2021). China was instrumental in helping Argentina during the pandemic. https://dialogochino.net/en/trade-investment/44624-china-was-instrumental-in-helping-argentina-during-the-pandemic/. Accessed 14th February 2022.
[vii] Emilie Sweigart & GabrielCohen (October 19th 2021). Argentina’s evolving relationship with China. https://americasquarterly.org/article/argentinas-evolving-relationship-with-china/. Accessed 14th February 2022.
[viii] Reuters (4th February 2022). China’s Zijin Mining to invest $380 million Argentina lithium plant. https://www.reuters.com/article/argentina-lithium-zijin-mining-idUSL6N2UF06P. Accessed 8th March 2022.
[ix] MercoPress (14th February 2022). Argentina to send military team to China to discuss arms deal. https://en.mercopress.com/2022/02/14/argentina-to-send-military-team-to-china-to-discuss-arms-deal. Accessed 17th February 2022.
[x] Argentina is particularly interested in purchasing JF-17 fighter aircraft from the PRC, with a view to engage in technology sharing as well.
[xi] ANI (17th February 2022). Argentina joins China’s Belt and Road Initiative. https://www.aninews.in/news/world/asia/argentina-joins-chinas-belt-and-road-initiative20220206205041/. Accessed 17th February 2022.
[xii] The White House (12th June 2021). Fact Sheet: President Biden and G7 leaders launch Build Back Better World (B3W) Partnership. https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/12/fact-sheet-president-biden-and-g7-leaders-launch-build-back-better-world-b3w-partnership/. Accessed 17th February 2022.
[xiii] Fermín Koop (16TH October 2019). Argentina crisis challenges China loan repayments. https://dialogochino.net/en/climate-energy/30864-argentina-crisis-challenges-china-loan-repayments/. Accessed 14th February 2022.
[xiv] Priti Singh (12th February 2022). A Strategic Partnership: Argentina joins China’s BRI. https://www.sundayguardianlive.com/world/strategic-partnership-argentina-joins-chinas-bri. Accessed 17th February 2022.
[xv] Kinling Lo & Rachel Zhang (3rd July 2021). Why is China so keen to get involved in Britain and Argentina’s dispute over the Falklands?https://www.scmp.com/news/china/diplomacy/article/3139710/why-china-so-keen-get-involved-britain-and-argentinas-dispute. Accessed 17th February 2022.
[xvi] Kris Boratyn (30th July 2021). Falklands row rekindled as over 80% of Argentina wants to reclaim British islands. https://www.express.co.uk/news/uk/1470155/Falklands-row-news-Argentina-reclaim-british-falkland-islands-poll-latest. Accessed 14th February 2022.
[xvii]Constitución Nacional, Disposiciones Transitorias, Congreso de la Nación Argentina. https://www.congreso.gob.ar/constitucionDispTransitorias.php. Accessed 14th February 2022.