Argentina seeks China financing for projects while pressured by IMF payments

Argentina’s President Alberto Fernández is betting on China to support projects in need of financing, especially after the defeat of the 2022 budget bill which left the authorities scrambling to secure funds to keep projects going. 

Fernández is scheduled to assist the opening ceremony of the Winter Olympics in Beijing on February 5, and hold meetings with Chinese authorities, including President Xi Jinping, in the days after. 

The main objective is to advance with negotiations regarding financing agreements for projects that are considered crucial by the Fernández administration.

A list of 17 projects that could receive Chinese financing was sent last month by Argentina’s foreign affairs ministry to Beijing.

The most important for the government are: 

Atucha IV nuclear power plant (US$9bn): A project that has been mulled since Néstor Kirchner’s presidency (2003-2007). Chinese financing was discussed during the administration of Mauricio Macri (2015-2019), but the same government cancelled it amidst the outbreak of the country’s economic crisis.

The project returned to the agenda the following year when Fernández came into office, and since then Beijing and Buenos Aires have been in conversations over the contract.

The plan has met with some local resistance, as the project would only feature Chinese technology. 

Local think tank IESO issued a report saying the China option “would subject Argentina to a dependency position, even regarding fuel supply.”

The Chinese-designed nuclear power plant of the ACP-1000 type would add 1,000MW of generation capacity.

Néstor Kirchner and Jorge Cepernic dams (US$4.7bn): Construction was halted last year due to disagreements between the government and Chinese-Argentine joint venture Represas Patagonia. 

The project involves the dams and a hydroelectric plant with 1.31GW generation capacity. 

Local press reported that China had cut funding for the plant in order to recoup initial disbursements from a loan signed in 2014. 

Since then, the parties have been in negotiations to resume financing and works.

Modernization of San Martín, Belgrano Norte and Roca railways: A project that has shown advances prior to Fernández’ visit to China. 

Last week the transport ministry and rail operator Trenes Argentinos Infraestructura signed three MOUs with representatives from CRRC Sifang Argentina and CRIG in South America to advance financing negotiations for the projects with the Chinese firms. 

Some of the works being discussed include electrifying sections of the Sarmiento and Belgrano Norte lines, as well as a 15km extension and rehabilitation of 94km in the latter, as well as renovating 60km and acquiring new rolling stock for the Urquiza service.

In addition, CRRC International will evaluate the purchase of 111 cars for the Belgrano Sur line, 45 for Sarmiento, 20 for Tren de la Costa (belonging to the Mitre line), 90 for regional and suburban services, as well as rails, tracks and technology for railway operations. 

IMF PRESSURE

Argentina is facing the China negotiations while dealing with difficult payments to the IMF, and it recently requested support from the US in seeking to reach a new debt agreement with the multilateral lender.

This week the government is facing a US$731mn debt payment that is coming due on Friday, and another of US$300mn in early February. In total, the South American country faces payments totaling US$19bn this year and an additional US$20bn in 2023, according to a report by local business daily El Cronista. 

Last week economy minister Martín Guzmán told a French newspaper that his country needed more time. 

“The difference we have with the IMF is the speed of fiscal consolidation and expenditures and incomes. We don’t want to hurt demand when the economy is recovering,” Guzmán told Le Fígaro.