US pressures Argentina?s Milei to scrap currency swap accord with China

Trump adviser says Washington would withhold support for Buenos Aires loan request to IMF if it reinforces China’s ‘position’ in Argentina

A top adviser to US President Donald Trump said that Washington’s support for Argentina’s ongoing negotiations with the International Monetary Fund hinges on President Javier Milei distancing himself from China, specifically by ending a currency swap agreement with Beijing.

Speaking at Miami Dade College on Thursday, Mauricio Claver Carone, Trump’s special envoy for Latin America, described Milei as “an ally” but stressed that Washington’s priority is to ensure any new IMF deal does not “reinforce China’s position” in Argentina.

“We want the famous credit line that Argentina has with China to end,” Claver Carone said, referring to the swap arrangement, which he labelled “extortionate”. He warned that as long as it remains in place, “China will always be able to extort Argentina.”

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Currency swap agreements allow two countries to exchange currencies at a pre-agreed rate, providing one another with liquidity in times of need.

For Argentina, the swap line with China has been critical, as it enables the country’s central bank to access renminbi that can be converted into dollars, bolstering foreign reserves and, by extension, the Argentine government’s ability to repay creditors including the IMF.

With Argentina’s history of financial instability and limited access to international markets, the swap agreement with Beijing has acted as an essential financial backstop. Originally signed in 2009, it has been renewed and expanded several times.

The current agreement, renewed in June 2024 after months of uncertainty, is worth around US$5 billion and runs until July 2026. Without it, Buenos Aires would face even greater pressure on its reserves at a time when economic conditions remain precarious.

The South American country has been dealing for years with persistent fiscal deficits and heavy reliance on foreign debt, creating a cycle of inflation and currency devaluation. Inconsistent economic policies and political instability have further undermined investor confidence, preventing sustainable growth.

Claver Carone’s comments come at a critical moment for Milei’s government, which is negotiating a US$20 billion loan from the IMF under a new 10-year programme.

Already the IMF’s largest debtor, Argentina is urgently seeking fresh funds to stabilise its financial system, recapitalise its central bank and eventually lift its long-standing currency controls.

Earlier this week, IMF Managing Director Kristalina Georgieva signalled support for Milei’s request, describing Argentina’s petition for an initial disbursement as “reasonable” and saying the government had “earned it” due to its economic performance.

However, US backing is crucial, as Washington is the IMF’s largest shareholder and holds decisive influence over major decisions.

The Milei administration dispatched Economy Minister Luis Caputo and presidential secretary Karina Milei, the president’s sister, to Washington this week to rally support.

Their meetings with Secretary of State Marco Rubio, however, yielded no concrete commitment, despite Milei’s strong personal alignment with Trump. Efforts to arrange a meeting with Claver Carone – considered a key figure within Trump’s inner circle – were also unsuccessful.

Complicating matters, Argentina was not spared from the baseline 10 per cent global import tariff announced by the White House on Wednesday.

Officials from Milei’s team are now in talks with US Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer to seek tariff exemptions and negotiate a long-term commercial agreement.

But the chances for a comprehensive free trade agreement with Washington are remote, as Argentina’s membership in Mercosur prohibits the country from negotiating with the US outside the South American trading bloc, which also includes Brazil and Paraguay.

The Trump administration’s demand regarding the Chinese swap puts Milei in a bind. After campaigning on an anti-China platform – describing Beijing as an “assassin” state – Milei has softened his stance in office.

Facing mounting economic pressures, he endeavoured to improve relations with China, which culminated in a visit to Beijing by the then-foreign minister, Diana Mondino, during which she assured Chinese Foreign Minister Wang Yi that Argentina’s “friendly policy” towards China would remain unchanged.

Milei himself publicly praised China as “a very interesting commercial partner” and thanked Beijing for renewing the crucial currency swap agreement.

Patricio Giusto – director of the Sino-Argentine Observatory in Buenos Aires, and a vocal advocate for stronger ties between the two countries – said Claver Carone’s demand was unrealistic given Argentina’s financial constraints and geopolitical needs.

He argued that it made no sense for Argentina to seriously consider giving up the swap agreements, as neither the IMF nor Washington would be willing to replace the liquidity. Moreover, he warned, scrapping the deal would carry negative consequences for Argentina’s relationship with China.

“If there will be some kind of offering, some kind of financial programme, a specific financial programme for Argentina, it might happen,” Giusto said.

“But so far, I don’t think it’s feasible. I think it was just a political statement taking advantage of the delicate situation of Argentina.”

Giusto said the United States may be using negotiations between Buenos Aires and the International Monetary Fund to try to distance Argentine President Javier Milei from China.

Milei is scheduled to travel to China in May to attend the China-CELAC Forum, a gathering of most Latin American and Caribbean nations.

(scmp.com)