On Sino-Argentine Infrastructure Plans: Q&A with Bruno Binetti

Photo of Alberto Fernández and Xi Jinping Casa Rosada | CC-BY-2.5 Argentina

The following is part of Asia-LAC Dialogues, a series of interviews produced by the Inter-American Dialogue’s Asia and Latin America Program, featuring global perspectives on recent developments in the Asia-Latin America and the Caribbean dynamic.

In a February 2022 meeting between Argentine President Alberto Fernández and Chinese President Xi Jinping on the sidelines of the 2022 Beijing Winter Olympics, the two leaders agreed that Argentina would join the China’s Belt and Road Initiative (BRI) and also discussed a range of initiatives that Argentina would pursue with Chinese support. These included work on hydropower and solar plants and rail, plans to use China’s BeiDou Navigation Satellite System, and possible deeper cooperation in green development, the digital economy, aerospace, and the Antarctic. Prior to the high-level meeting, China National Nuclear Corporation (CNNC) had also signed a contract to build Argentina’s US$8 billion Atucha III nuclear power plant using Chinese Hualong One technology, and with China agreeing to finance 85 percent of the plant’s development.

If they materialize, these projects will expand on China’s already robust engagement with Argentina, which has lead to the development of dams, railways, and other transport and energy projects in the country. According to the Inter-American Dialogue’s China-Latin America Finance Databases, Argentina has received 13 loans from Chinese policy banks, totaling US$17 billion, and 36 loans from Chinese commercial banks, the most in the Latin America and the Caribbean (LAC) region. China is also an important source of foreign reserves for Argentina. In November 2022, the Argentine and Chinese governments reached an agreement to increase their existing currency swap deal by US$5 billion.

For additional insight on prospects for future Sino-Argentine deal-making, we spoke with Bruno Binetti, a non-resident research fellow at the Inter-American Dialogue.

black and white photo of Bruno Binetti
Bruno Binetti is a non-resident research fellow with the Office of the President at the Inter-American Dialogue.

Inter-American Dialogue: What are the outcomes to date of Argentina’s 2022 decision to join the BRI? Did any new projects materialize as a result of the talks between Presidents Fernandez and Xi on the sidelines of the Beijing Olympics?

Binetti: Argentina’s relationship with China is marked by the South American country’s economic fragility and the government’s desire to balance the United States. Joining the BRI was a diplomatic gesture towards China that didn’t include concrete commitments; China has signed nearly identical memorandums with over 140 adherents. However, having Argentina as a member is important as a sign of China’s soft power, it’s the largest Latin American economy to join so far.

President Fernández likely joined the BRI to try to persuade the Chinese government to make concessions on two important issues: the renegotiation of a US$4.8 billion loan to build two hydropower dams in Patagonia and the extension of the US$18 billion currency swap between Argentina’s and China’s central banks.

In the case of the dams, the original financing agreement expired in 2021 but the dams won’t be finalized until 2027 at the earliest. Argentina didn’t want to start repaying the loan until construction, carried out by a consortium led by China’s Gezhouba, is completed.

Secondly, the currency swap with China has become critical to strengthen Argentina’s dwindling foreign currency reserves. Argentina wants to increase the swap to over US$23 billion, and for China to authorize the conversion of part of the renminbi held by Argentina’s Central Bank to US dollars. Progress has been made, but few specifics have been announced.

Inter-American Dialogue: The “on again, off again” US$8 billion Atucha III nuclear power plant also came up during the Fernandez-Xi meeting. What are the prospects for that project’s development? Is a possible Atucha IV project still in the works? What is China’s primary interest in building and financing Atucha III, and what is shaping Argentina’s decision-making?

Binetti: This has been a complex negotiation. Originally, China was going to finance the construction of two power plants: Atucha III with a reactor based on the CANDU model Argentina has used since the 1970s, and Atucha IV with a Chinese Hualong One reactor. During the Macri administration (2015-2019) plans for the CANDU reactor were scrapped due to Argentina’s economic crisis, so the new project has included only Atucha III with Chinese technology. Under Alberto Fernández plans for Atucha III continued, but Argentina demanded China provide 100 percent of the financing, rather than 85 percent as previously discussed.

The project would allow Argentina to gain valuable expertise on more advanced technology: the CANDU reactor uses heavy water and slightly enriched uranium and is considered outdated, while Hualong One uses light water and enriched uranium. Further, no Western company can match the financing Beijing offers. For China, meanwhile, exporting a reactor to a country with a long nuclear history like Argentina would cement its role as a key nuclear player. So far, Hualong One reactors have only been built within China and in Pakistan. As with other aspects of the relationship, the key factor is whether the project is viable given Argentina’s economic crisis.

Inter-American Dialogue: Given that Argentina has now joined the BRI, sought potential membership in the BRICS, and negotiated a new round of currency swaps and high-level forums between Argentina and China, it’s safe to say that relations between the two countries deepened significantly during the Fernández administration. How important is China to Argentina at this juncture? Where do you see the relationship heading, whether for the remainder of Fernandez’s term or beyond?

Binetti: No matter who wins the 2023 presidential elections, maintaining good relations with China is a necessity for any Argentine government. Beijing is Argentina’s second largest trading partner after Brazil, and its purchases of agricultural commodities provide much-needed hard currency. In a country as turbulent and risky as Argentina, Chinese companies and banks are also key sources of investment and loans for infrastructure, including in critical areas such as lithium extraction and renewable energy generation.

Naturally, the Argentine left also wants to deepen ties to Beijing to counterbalance Washington, but I expect this pragmatic partnership to continue even under an Argentine government that could prefer to align with the United States on security and broader foreign policy issues.

This doesn’t mean there won’t be challenges. Argentina will have to decide soon about the deployment of 5G technology and what role Chinese suppliers will have in this process. And concerns about the “re-primarization” of the economy will also continue if China buys or extracts Argentina’s raw materials without including value added.


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