Deal extension allows Trump ally Argentina to borrow another $5 billion from China

BUENOS AIRES, Argentina (AP) - Argentina will be able to tap another $5 billion from China in a deal announced Thursday, easing some pressures on the South American nation’s dwindling foreign reserves and underscoring the strategic importance of its partnership with Beijing despite recent criticism from the Trump administration.

The Central Bank of Argentina said the countries had extended their long-standing $18 billion bilateral currency swap for another year, allowing Argentina to get $5 billion more from the People's Bank of China - worth 35 billion in China’s yuan currency, also known as renminbi - until mid-2026.

For Argentina, paying in renminbi rather than U.S. dollars gives its dangerously depleting foreign currency reserves some breathing room to shore up the wobbly peso. It also helps companies in crisis-stricken Argentina pay for Chinese imports and makes it easier for Chinese companies to invest in Argentina.

Argentine President Javier Milei needs all the hard currency he can get his hands on to avoid the sharp devaluation expected after securing an initial bailout deal with the International Monetary Fund.

The currency swap extension comes shortly after U.S. Special Envoy for Latin America Mauricio Claver-Carone publicly voiced alarm over the deal between the Trump administration’s increasingly close ally and its increasingly intense rival.

"We want the famous credit line that Argentina has with China to end," Claver-Carone told an a conference at Miami Dade College last week. "We want to be sure that any potential agreements with the IMF do not end up prolonging that credit swap that they have with China. … That’s our priority.”

With the currency deal in place, “China will always be able to extort" Argentina, he added.

China swiftly fired back, with Chinese Foreign Ministry spokesperson Lin Jian defending the swap earlier this week as an example of "practical cooperation with Argentina on the basis of equality and mutual benefit."

"For a long time, Argentina's currency swap with China has played an important role in stabilizing its economy and finance, which is welcomed and well-received in Argentina," he told reporters Tuesday.

Argentina faces a tough balancing act under Milei - a radical libertarian who has cozied up to U.S. President Donald Trump, flying to the U.S. at least 10 times in the last 15 months in hopes of courting tech investment, striking a free trade deal and securing fresh funds from the IMF.

During his 2023 presidential campaign, Milei left no doubts about his staunch opposition to China, calling its leaders "assassins" and vowing he wouldn't "do business with communist countries."

But since taking office and trying to fix the economic shambles bequeathed to him by decades of left-wing populist rule, Milei has pivoted to a more pragmatic stance toward Beijing, one of Argentina's top trading partners.

China snaps up Argentine soybeans, beef and wheat, runs hydroelectric dams in the country and maintains strategic assets, including stakes in lithium mines and a space station in northern Patagonia. Milei oversaw an earlier extension of the currency swap in June 2024.

"This allows the Bank of Argentina to reduce risks in its transition to a consistent and sustainable monetary and exchange rate regime in a challenging international context for external capital flows," the Argentine central bank statement said.

Without Thursday’s revival of the currency deal, the tranche available to Argentina would have started declining in June, squeezing Argentina’s reserves at a critical time.