Javier Milei was not the top choice for Beijing in Argentina’s presidential race. The extreme libertarian and self-proclaimed anarcho-capitalist focused his campaign on cutting ties with “communist” China, labeling their government as “assassins,” and accusing the CCP of silencing dissidents. His win in the election now creates complications in the relationship between the two countries. With Argentina facing economic struggles and limited options, Milei has toned down his aggressive language since taking office last week. According to Igor Patrick’s coverage in the South China Morning Post, Beijing is utilizing its financial power to maintain a strong partnership with Buenos Aires.

According to Argentine media, China has put a hold on a currency exchange deal worth US$6.5 billion with Argentina. The suspension will continue until President Javier Milei shows a willingness to communicate with Beijing.

The announcement of the relocation occurs only 10 days after the new president took office. During their campaign, the president promised to sever connections with China, making it clear that Milei will have a difficult task in fulfilling these promises.

The money is a part of a yearly agreement that has been renewed since 2009. This is important for Buenos Aires because it has a shortage of international dollar reserves. Argentina has used these exchanges as one of its limited ways to borrow money, as the country has a history of not paying its international debts. [Source]

Due to Argentina’s economic turmoil, voters are seeking drastic change, but this has created difficulties for Milei. The country is facing high inflation, a poverty rate of over 40%, and a public debt of 90% of its GDP. Milei’s proposed solution was to adopt the U.S. dollar and move closer to the United States, but with debts of $44 billion to the IMF and negative foreign reserves of $10 billion, Chinese officials warned that this move could harm their important financial relationship. Argentinian social media users joked that Milei’s actions had consequences, pointing out that he cannot expect help from someone he has just insulted. In response to a post by Global Times about large protests against Milei’s government, a user on Weibo questioned if he was even elected by the people, commenting on the nature of Argentinian decision-making. Another user noted that only half of the voters actually supported him, so it is not surprising that there is backlash on the streets.

Milei’s limited influence resulted in him retracting some of his strong statements. After assuming his position, he personally asked for economic assistance from Xi and requested the renewal of the currency exchange agreement with Beijing. This week, he chose career diplomat Marcelo Suárez Salvia as Argentina’s new ambassador to China, which some in Argentina viewed as a conciliatory gesture towards Beijing. In the Latin American Advisor, a daily publication of the Inter-American Dialogue, multiple analysts suggested that Milei had to balance his ideological beliefs with practical considerations.

Benjamin Gedan, head of the Wilson Center’s Latin America Program:

The moderation of Javier Milei’s stance towards China was unsurprising, similar to the chimichurri that is consistently served alongside bife de chorizo. Argentina’s economy is struggling and cannot afford to lose access to its primary export market and main source of strong currency. However, Argentina’s strategic alliance with China is fragile. While Milei has toned down his animosity towards Beijing and exchanged diplomatic pleasantries with Xi Jinping, he stands out in a region where China is accustomed to flattery and nonalignment in global power struggles due to his ostentatious admiration for the United States.

Jorge Heine, a professor of research at the Frederick S. Pardee School of Global Studies at Boston University and former Chilean ambassador to China:

“Milei is facing a difficult situation. He requires assistance from the United States to renegotiate Argentina’s $45 billion debt to the IMF, but he also relies on the Chinese market. While the economies of Argentina and China work well together, the same cannot be said for Argentina and the U.S. The U.S. does not purchase soybeans, meat, or grains from Argentina, and neither does Israel. Milei must come to terms with this harsh reality or risk destabilizing his government.” [Source]

Oliver Stuenkel, a researcher at the Carnegie Endowment for International Peace, described China’s growing presence in Argentina and strong economic connections before Milei’s appointment.

China is Argentina’s second-largest trading partner, following Brazil. They are also the second-largest recipient of Argentine exports, including soybeans and beef. Over the past decade, trade between the two countries has consistently grown. In 2010, Chinese products only made up 5 percent of Argentina’s imports, but now they account for 20 percent. Among all Latin American countries, China’s “big five” commercial banks have provided the most loans to Argentina, demonstrating their significant investment in the country. In 2022, Argentina officially joined the Belt and Road Initiative and signed trade and infrastructure deals worth over $23 billion. The most strategically important of these include two hydroelectric dams in Santa Cruz and the Atucha III nuclear power plant, which is worth $8 billion and will support Argentina’s advanced nuclear industry. China is also viewed as a key partner in Argentina’s efforts to become a major producer of lithium in the global shift towards renewable energy, particularly for electric vehicles. With the fourth-largest lithium reserves after Chile, Bolivia, and Australia, many see this as a promising aspect of Argentina’s overall economic prospects.

Some, not all, of the progress made by China is focused on economic growth. China’s influence is noticeable in various places, such as Patagonia where the People’s Liberation Army has been running a space research facility since 2018. Another example is Ushuaia, the southernmost point of Argentina, where China had considered building a naval base in 2021. While this plan appears to have been put on hold, it highlights the potential for China’s power to expand in the region. [Source]

A high-ranking member of Milei’s team in charge of the transition has recently stated that Argentina will not be joining the BRICS, a group of developing nations consisting of Brazil, Russia, India, China, and South Africa. This decision comes despite Argentina being invited to join in August. The country’s involvement in the Belt and Road Initiative (BRI) is also uncertain. While it officially joined the BRI in 2022, Sergio Tomas Massa, a former economy minister and Milei’s opponent in the election, signed a cooperation agreement to further promote the BRI back in June. Now, some experts predict that Milei may attempt to withdraw government support from infrastructure projects funded by China.

Sharing some more upbeat perspectives on the future of Argentina-China cooperation just before the election, Fermín Koop from Diálogo Chino highlighted other limitations on Milei’s desire to scale back collaboration:

Ignacio Villagran, director of the Argentina-China Studies Centre (ACSC) at the University of Buenos Aires, agrees: “For China, it doesn’t make a difference who is in power as long as the investment projects continue. While there’s a question mark on Milei, he won’t have a say on what the provinces agree with China.”

The way Argentina is organized allows its provinces to conduct business with China without involvement from the central government. A prime example of this is the northern province of Jujuy, which is home to Cauchari, a solar plant with a capacity of 300 MW. The plant was funded by Chinese banks and the province also has a lithium extraction plant that is partially owned by a Chinese mining company called Ganfeng Lithium.

Guo Cunhai, who heads the Centre for China and Latin America Studies (CECLA) at the Chinese Academy of Social Sciences, stated that the bond between China and Argentina has endured challenges in the past and is expected to persist. He emphasized that the foundation of this relationship lies in mutual dependency and that collaboration will bring benefits while division will be detrimental for both nations. [Source]