Javier Milei, Argentina’s new president, has called for reforming the country’s foreign policy and reducing ties with China. Transforming relations between Argentina and China won’t be that simple.
Since taking power in December, Argentina’s new government, led by the libertarian Javier Milei, has signaled a sharp turn in its foreign policy that could reconfigure the relationship with China.
Following the strengthening of the bilateral bond over the past two decades, which led to growing trade exchange, diplomatic cooperation, and more significant investment and financial assistance from China, President Milei and members of his team have now expressed their desire to raise greater alignment with the United States and at the same time the weakening of relations with China.
Analysts say that Argentina’s new positioning under the Milei government has raised alarm bells, given China’s great importance in the national economy: the Asian country is Argentina’s second trading partner and the destination of about 10% of its exports. At the same time, the structural and long-term nature of the trade and investment relationship allows us to anticipate a certain inflexibility of the association between both countries.
Milei’s decisions and gestures towards China
The most outstanding political event regarding the relationship with China since the Milei era began has been the refusal to join the BRICS group of emerging economies, a bloc of which China is a member along with Brazil, Russia, India, and South Africa. Argentina planned to join in January after being invited in 2023, thanks to the push from Brazil and China in the candidacy. In a letter sent to the group at the end of December, Milei maintained that the current foreign policy axes differ from those of the previous government of former President Alberto Fernández.
Asked about the situation in Argentina, Chinese Foreign Ministry spokesperson Wang Wenbin commented that China is ready “to work with Argentina to cement mutual political trust, enhance high-quality Belt and Road cooperation and take advantage of our complementary advantages.”
After this series of ups and downs in the first months of Milei’s government, Mondino and Chinese Foreign Minister Wang Yi met in February on the sidelines of the Munich Security Conference. Both took advantage of the occasion to reiterate their commitment to maintaining solid relations between Argentina and China.
In mid-January, Foreign Minister Diana Mondino met with the Chinese ambassador to Argentina and noted that “there is no doubt about the importance of commercial exchange between both countries.” In turn, the ambassador stated that she hopes that “the friendship and cooperation” between both countries will continue with the Milei government.
The commercial relationship between Argentina and China
Last year, China represented 7.9% of Argentine exports, totaling 5.3 billion dollars. It was the third largest buyer, behind Brazil and the United States. In addition, it represented 19.7% of imports, a total of 14.5 million dollars, only behind Brazil.
Among the main export products are soy derivatives, beef, grain barley, shrimp, prawns, and lithium carbonate. Meanwhile, among the imports from China are components for cell phones, televisions, and other electrical appliances, cars and auto parts, fertilizers, and electric generators.
Despite the bumps since Milei’s rise, it seems unlikely that the agricultural relationship between both countries will be affected, given its importance for both parties, suggests Mario Quinteros, a former Argentine diplomat in China: “Milei has had unconstructive attitudes in relationship to China. However, it is necessary to remember that China operates with a long-term perspective and that on a commercial level, there is mutual benefit: Argentina’s agricultural exports improve its trade balance but are also important to ensure China’s food supply.”
For his part, Gonzalo Ghiggino sees the relationship between Argentina and China as necessary. “Milei will most likely keep the relationship on autopilot. In the trade issue, there are certain risks, since although China can find new suppliers of soy and meat in Brazil, Australia, and the United States, Argentina would not find an alternative buyer to China.”
Economist Julio Sevares, author of the book “Clash of Giants: US vs. China and Reglobalization,” adds a vital point linked to the trade issue: “There are negotiations for the entry of products into China, such as wheat, which has just been approved after 25 years of negotiations. A possible commercial impact of the deterioration of political ties could occur on this side.”
A “cooling” of the relationship between Argentina and China?
Maria Francesca Staiano, coordinator of the Center for Chinese Studies at the University of La Plata, remembers that former president Mauricio Macri (2015-2019) also proposed prioritizing the alliance with the United States and Europe and campaigned politically with a speech that put into doubt Argentina’s ties with China. However, it was not as aggressive as Milei, who has called China a “murderer.”
However, Macri could only detach himself a little from the relationship between Argentina and China due to the deep economic interdependence and the current cooperation agreements. In fact, in 2017, he participated in the Belt and Road Forum in Beijing (although Argentina would not join the initiative until 2022, under his successor Fernández). “With Milei, the same thing is going to happen: after a first cooling phase, the situation is going to be recomposed,” says Staiano.
Jorge Malena, director of the postgraduate course in China Studies at the Argentine Catholic University (UCA), considers that although there were statements by Milei during the presidential campaign and at the beginning of his government that indicated a weakening in the relationship between Argentina and China, reality shows that during the start of the administration, a modification of the position vis-à-vis Beijing has taken place.”
An example of the change occurred when China suspended a tranche of the $6.5 billion currency swap negotiated under the previous Argentine administration.
Without this section of the swap, it would have been impossible to contain the fall in GDP to 1.1% and for unemployment to be at its lowest levels since 1991, given the historic drought,” explains Jorge Carrera, former vice president of the Central Bank of Argentina, referring to the three years of drought that seriously affected the country’s agricultural production. It would be a mistake for this government to neglect the relationship between Argentina and China and for this to affect this source of financing.
Investments
China has a growing investment impact in Argentina’s mining sector. Seven of the 12 projects with Chinese capital in the country are lithium, two gold-silver, one silver-copper-lead, one copper-gold, and one iron. For Ghiggino, “those operations are unlikely to be endangered because lithium has a strategic nature.”
Among the main investment commitments in lithium is that of Ganfeng Lithium, the Chinese mining giant, to develop the Mariana project and the agreement between Lítica
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Resources and Ganfeng to acquire the Pozuelos Pastos Grandes project, both in the province of Salta.
Argentina has a currency swap line with China worth 18 billion dollars, allowing it to pay part of its international debts. During 2023, Argentina was able to use 5 billion dollars from the swap.
In turn, the Chinese company Shandong Gold has a 50% stake in the Veladero gold deposit, Zijin Mining is carrying out the Tres Quebradas lithium project in Catamarca, and the French mining group Eramet partnered with the Chinese steel company Tsingshan to develop the lithium plant in the Centenario-Ratones salt flat.
For the former Argentine ambassador to China, Diego Guelar (2015-2019), “China is not going to be tempted by short-term statements, and instead, the long-term vision will prevail. However, political ups and downs will affect the dynamics of infrastructure investments.”
The uncertainty surrounding infrastructure works with financial contributions from China takes on a very relevant dimension in the context of the abrupt decline in public works announced by the Milei government to carry out its strong fiscal adjustment plan. “Financing for infrastructure investments could fall in a context where it is more necessary than ever,” warns Gonzalo Ghiggino. At the same time, Guelar highlights the potential that Argentine provinces have to make cooperation agreements with their counterparts in China.
China’s most significant infrastructure investment project is the construction of two hydroelectric dams on the Santa Cruz River in the province of the same name. Although it began in 2015, political and macroeconomic instability delayed the progress to the point that the work still needs to be completed.
In renewable energies, China is also a central player for Argentina. Among the most relevant national projects financed by China are the Loma Blanca (Chubut) and Miramar (Buenos Aires) wind farms, operated by the firm Goldwind, and the Vientos del Secano project (Buenos Aires), by Envision Energy. In solar energy, the most relevant project is the Cauchari Park, the largest in the country, for which the province of Jujuy has agreed with the company Shanghai Electric Power to construct a new expansion by 2024.
Another important chapter of the relationship between Argentina and China is transportation. Among the most critical projects is rehabilitating the Belgrano Cargas railway line, which the Chinese company CMEC has been carrying out. The company has already spent almost $2.5 billion. CMEC also showed interest in financing the reactivation of the Norpatagónico Train.
The investment projects are part of the political agreements reached with China during the previous government, which include financing of 14 billion dollars under the mechanism of the Strategic Dialogue for Economic Cooperation and Coordination (DECCE) and a second package of 9.7 billion dollars that the country would present in the framework of its accession to the Belt and Road Initiative.
“Concerning investments, those originating from agreements between States or public organizations, which include a contribution from the Argentine State, have had difficulties for years and suffered delays and cancellations due to the lack of local funds, a situation that will worsen in the immediate future due to the fiscal adjustment program that the current government is carrying out,” says economist Sevares.
Conclusion
The future of the relationship between Argentina and China under President Javier Milei’s administration remains uncertain but complex. Despite Milei’s intention to shift Argentina’s foreign policy alignment towards the United States and reduce ties with China, the deep economic interdependence between the two nations presents significant challenges to any drastic policy changes.
China is Argentina’s second-largest trading partner, a vital export destination, and a significant source of imports and investment. This economic relationship encompasses key sectors such as agriculture, mining, and infrastructure, making a complete severance impractical. Furthermore, Argentina’s reliance on Chinese financing and investment for infrastructure projects and economic stability underscores the structural inflexibility of the bilateral relationship.
While Milei’s initial gestures, such as rejecting Argentina’s planned entry into the BRICS group and expressing strong rhetoric against China, signal a potential cooling of relations, the mutual benefits derived from trade and investment suggest a more nuanced evolution. Analysts predict that after an initial phase of political tension, the relationship between Argentina and China will likely stabilize, driven by long-term economic interests and practical necessities.
China’s strategic investments in Argentina’s mining sector, particularly in lithium, and its involvement in critical infrastructure projects like hydroelectric dams and renewable energy initiatives highlight the ongoing importance of Chinese capital. Despite Milei’s fiscal adjustments and potential reductions in public works, these investments are expected to persist due to their long-term nature and strategic importance.
The relationship between Argentina and China will likely experience periods of tension and realignment under Milei’s presidency. However, the deep-rooted economic ties and mutual benefits will compel both nations to navigate these changes pragmatically, ensuring that their potentially altered partnership remains robust and essential for Argentina’s economic stability and growth.
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