China boosts Argentina's access to the yuan under currency deal as peso plummets

• China boosted Argentina's access to the yuan under a currency swap deal.
• Argentina's president said the country can now tap $6.5 billion worth of yuan, up from $5 billion.

Argentina will have more access to Chinese yuan under a currency exchange deal to help prop up a plunging peso.

The boost is a part of a previous swap deal that was reached earlier in 2023 and marks the second time Argentina has tapped the Chinese central bank.

"China has increased the amount and instead of $5 billion we are getting $6.5 billion," Argentine President Alberto Fernandez told Radio 10 in China, according to Reuters. "Every time we went through difficult times, Xi Jinping's government gave us its support. This is an important step so that production (in Argentina) does not stop."

A currency swap is a deal made by two central banks who simultaneously exchange a certain amount of currency with a promise to pay each other back at an agreed upon interest rate.

Argentina's swap deal with China will enable it to replenish foreign exchange reserves, which have all but vanished amid economic crisis. Inflation has skyrocketed to 138% and the central bank has raised interest rates to 133% in response. Dollar reserves have cratered to negative levels.

Meanwhile, Argentina's increasing reliance on the yuan marks another instance of de-dollarization as some countries look to shift away from the greenback.

China has been encouraging global use of the yuan as a challenger to the dollar in global finance and has entered into multiple currency swap agreements in recent years.

Other South American countries have turned to the yuan, and Egypt issued yuan-denominated "panda bonds" for the first time in the past week. Russia has also been using the Chinese yuan to settle a growing number of trade transactions with other countries.

But despite Argentina's latest move toward the yuan, the country is headed into a presidential election this weekend, and front-runner candidate Javier Milei plans to dollarize the economy, abandoning the peso entirely.