\u201cChina is a very interesting trading partner,\u201d said Javier Milei, who just a year ago described the Chinese government as as \u201cassassin.\u201d They \u201cdo not make demands, the only thing they ask is that they not be bothered.\u201d<\/p>\n
The US continues to lose economic influence in its own \u201cbackyard,\u201d particularly South America, with whom China is already the largest trade partner. Even Javier Milei\u2019s fanatically anti-Communist government in Argentina is now seeking to forge closer economic ties with Beijing as investments begin to dry up. Almost exactly a year after telling Tucker Carlson that he would never trade with China due to its government\u2019s left-wing, authoritarian proclivities, Javier Milei has nothing but fond words for the US\u2019 main strategic rival today.<\/p>\n
Alarm bells began flashing in Washington when news emerged that a delegation of senior Argentine ministers, including Karina Milei, the president\u2019s sister who is also general secretary of the presidency, Economy Minister Luis Caputo and Foreign Minister Diana Mondino, had met with China\u2019s Foreign Minister, Wang Yi, on the side lines of the recent UN General Assembly. According to the Argentine media outlet Infobae, the purpose of that meeting was to relaunch the strategic economic agreement between the two countries:<\/p>\n
The Biden administration had thought Milei\u2019s government was beyond Xi Jinping\u2019s influence, but all of a sudden the Argentine president is seeking a rapprochement with the communist regime to renew the Chinese swap line that underpins Argentina\u2019s central bank reserves as well as facilitate investments by Chinese companies in lithium and copper, two minerals that Washington considers globally strategic.<\/p>\n
\u201cWe have to be careful with how we handle this relationship,\u201d U.S. Ambassador to China Nicholas Burns said of diplomatic ties between China and the US. \u201cWe\u2019re systemic rivals, and I think we\u2019ll be systemic rivals for the next decade, maybe even beyond.\u201d<\/p>\n
And Burns added so that there were no doubts: \u201cChina is aiding and abetting the Russian war machine. There is no indication that it will move away from its \u2018no limits\u2019 partnership with Russia. The Chinese like to say they are neutral \u2014 in the war against Ukraine \u2014 but the evidence suggests otherwise. Beijing is sending much-needed components to Russia, on which the Kremlin depends for its ongoing war effort.\u201d<\/p>\n
In this context, Milei\u2019s strategy with China to secure the Central Bank\u2019s reserves and obtain investments may trigger a short circuit with the White House. And the eventual short-circuit would continue in the future, regardless of Biden\u2019s successor in the Oval Office: it is a bipartisan position, supported by both Kamala Harris and Donald Trump.<\/p>\n
Tellingly, the Argentine government tried to play down the meeting, tagging it on to the end of a Foreign Ministry press release, while China\u2019s Foreign Ministry made quite a big deal out of it, dedicating a whole press release to the matter.<\/p>\n
Wang Yi said China has always attached great importance to China-Argentina relations and maintained the stability and continuity of its policy towards Argentina. It is a great pleasure to see that the development of relations with China has become a social consensus in Argentina that transcends political parties\u2026<\/p>\n
The economies of China and Argentina are highly complementary, and practical cooperation between the two countries has a solid foundation. China is willing to remain a good friend and partner of Argentina in the development process, expand cooperation in various fields, and share development opportunities. It is incumbent upon both sides to support each other on issues concerning their respective vital interests and far-reaching concerns, and it is hoped that the Argentine side will earnestly abide by its commitments, adhere to the one-China principle and resolutely oppose \u201cTaiwan independence\u201d. China is willing to work with Latin American and Caribbean (LAC) countries, including Argentina, to advance the construction of the China-Community of Latin American and Caribbean States (CELAC) Forum and deepen China-LAC relations.<\/p>\n
From Communist \u201cAssassin\u201d to \u201cVery Interesting Trade Partner\u201d<\/p>\n
The significance of Milei\u2019s U-turn on China cannot be overstated. His government has aligned Argentina as firmly as possible with the Collective West, even going so far as to apply to become a \u201cglobal partner\u201d of NATO, months after cancelling Argentina\u2019s membership of the BRICS-plus alliance. It has offered to send weapons to Ukraine while pledging total support for Israel\u2019s genocidal war crimes. In an interview\u00a0with\u00a0Bloomberg just over a year ago when still on the campaign trail, Milei referred to the Asian nation as an \u201cassassin\u201d:<\/p>\n
\u201cWe do not make pacts with communists\u2026 I would not promote relations with communists, nor with Cuba, nor with Venezuela, nor with North Korea, nor with Nicaragua, nor with China\u2026 People are not free in China, they can\u2019t do what they want and when they do, they get killed. Would you trade with an assassin?<\/p>\n
In his chat with Tucker Carlson, Milei said:<\/p>\n
Not only am I not going to do business with China, I am not going to do business with any communist\u2026 I am a defender of freedom, peace and democracy. The Chinese don\u2019t fit in\u2026<\/p>\n
We want to be the moral beacon of the continent, the defenders of freedom, democracy, diversity and peace. We from the State are not going to promote any type of action with communists or socialists.<\/p>\n
Granted, all of these statements were made on the campaign train. When Milei the candidate became Milei the president, he quickly softened his position, as he has done with many of his other more radical positions, such as his pledge to shutter Argentina\u2019s central bank and to dollarise Argentina\u2019s economy. In relation to China, Argentina\u2019s second largest trade partner, he quickly clarified that he wouldn\u2019t stand in the way of private business deals between Argentinian and Chinese companies.<\/p>\n
\u201cWe are liberals,\u201d he said. \u201cAnd if people want to do business with China, they can.\u201d<\/p>\n
But there is a world of difference between Argentine companies doing business with Chinese companies and Argentina\u2019s government pushing for closer economic ties with Beijing. This is precisely what Milei said he would never do.<\/p>\n
Softly, Softly<\/p>\n
To its credit, the Chinese government remained characteristically tight lipped even as Milei threw insult upon insult in its direction. When Milei won the election, Beijing congratulated him, adding that \u201cChina values its relations with Argentina\u201d and is \u201cready to work with Argentina to continue nurturing our friendship and contribute to each other\u2019s development.\u201d When Milei rejected Xi Jinping\u2019s personal invitation to Argentina to join the BRICS grouping, Beijing said nothing; it just waited.<\/p>\n
That softly-softly approach is now paying dividends. As we reported in May, when Argentina\u2019s central bank desperately needed to churn out new 20,000 peso notes in order to keep up with the country\u2019s triple-digit inflation rate, it awarded the contract to the China Banknote Printing and Minting Corporation, a state-owned corporation that carries out the minting of all renminbi coins and printing of renminbi banknotes for the People\u2019s Republic of China.<\/p>\n
The move, understandably, raised some eyebrows among members of Milei\u2019s La Libertad Avanca (Freedom Advances) coalition party. As an article in Clar\u00edn noted, some questioned the wisdom of entrusting the manufacturing of a resource as \u201csensitive and strategic\u201d as the country\u2019s national currency to a company that is essentially owned by China\u2019s \u201cassassin\u201d government. Today, Milei has a very different set of words to describe the Chinese government.<\/p>\n
\u201cChina is a very interesting business partner,\u201d he said in an interview on Sunday. \u201cThey do not demand anything, the only thing they ask is that they not be bothered.\u201d<\/p>\n
In others words, general non-interference \u2014 the diametric opposite to how the US has traditionally engaged with its Latin American neighbours. Milei was also seemingly impressed by Chinese efficiency, telling Gim\u00e9nez, \u201cWe had a meeting with the ambassador (Wang Wei) in June, the next day they unlocked the swap,\u201d referring to the rescheduling, last June, of the payments corresponding to an activated tranche of the currency swap that both nations are keen to maintain.<\/p>\n
Milei also said he will be travelling to Beijing in January to take part in the China-CELAC (Community of Latin American and Caribbean States) Forum. Inaugurated in 2011 by the late Venezuelan President Hugo Chavez, CELAC is a regional bloc of Latin American and Caribbean states created not only to deepen regional integration but also to reduce the overweening influence of the US on Latin American politics and economics. Its members include all of the American continent\u2019s 33 sovereign nations \u2014 with the notable exception of the US and Canada.<\/p>\n
In 2021, Mexico\u2019s now-former President Andr\u00e9s Manuel Lop\u00e9z Obrador proposed using CELAC to replace the Washington-based Organization of American States (OAS) as well as to create a supranational organization for the political, economic and social integration of Latin America, based loosely on the European Union.<\/p>\n
While that hasn\u2019t happened, which is probably a good thing, CELAC has gained in importance in the last few years, especially following the OEA\u2019s role in the coup d\u2019\u00e9tat against then-Bolivia President Evo Morales in 2019. In July 2023, CELAC participated in a joint summit with the EU in Brussels. As we reported at the time, prominent CELAC members like Brazil, Mexico, Venezuela and Colombia refused to sign off on a final declaration condemning Russia\u2019s invasion of Ukraine, much to the chagrin of EU negotiators.<\/p>\n
Next up on the agenda will be the China-CELAC forum, to be held in Beijing in January.\u00a0Not only will Milei be present at the event but he hopes to use it as a springboard for closer China-Argentina relations. According to Wang Yi\u2019s account of his recent meeting with the Argentine ministers in New York, \u201cArgentina is ready to actively participate in cooperation between LAC and China, which will help CELAC countries achieve further development.\u201d<\/p>\n
Not only will Milei be lobbying for Argentina\u2019s economic interests in Beijing, he will be doing so from a forum that was inaugurated by Hugo Chavez. And according to Chavez\u2019s successor, Nicol\u00e1s Maduro, CELAC is now in the sights of the US \u2014 the nation to which, together with Israel, Milei has pledged total fealty. The Venezuelan president pointed out that Washington does not look favourably on the existence of a regional organization independent of its influence, referring to CELAC as an institution that \u201cis not kneeling to its interests.\u201d<\/p>\n
Saving Argentina\u2019s Economy<\/p>\n
This last-ditch U-turn is geared at trying to save Argentina\u2019s economy from the grinder Milei\u2019s own policies have put it through. Beijing has been a major creditor of Argentina since signing a currency swap in 2009 with then-President Cristina Fern\u00e1ndez de Kirchener. That swap is now the largest source of foreign reserves in the central bank\u2019s depleted coffers. It is also the biggest yuan swap line in the world, worth $18 billion. To keep servicing its outsized debts, including the roughly $40 billion it owes the IMF, the Milei government desperately needs that swap line to keep flowing. It has already pawned a significant chunk of the country\u2019s gold reserves.<\/p>\n
China is also Argentina\u2019s second largest trade partner, after Brazil. Despite attracting interest from the likes of Elon Musk and BlackRock\u2019s Larry Fink, the Milei government\u2019s strategic realignment with the US and Israel appears to have brought it little in the way of new funds.<\/p>\n
Meanwhile, trade between China and Argentina the two countries has declined sharply since Milei\u2019s election, with both exports and imports falling. China has looked to alternative markets for agricultural goods, including neighbouring Brazil. It is also heavily invested in many of Argentina\u2019s strategic sectors, including lithium and gas \u2014 sectors that US government and corporations also have their eyes on \u2014 as well as the construction (stalled since 2022) of Argentina\u2019s nuclear plant, Atucha 3, and the N\u00e9stor Kirchner-Jorge Cepernic hydroelectric plant, the largest bilateral infrastructure project ever attempted between the two countries.<\/p>\n
And investment is one thing Argentina desperately needs. A recent report by the consulting firm Orlando J. Ferreres, which monitors the level of investment on a monthly basis, indicated that in August gross domestic investment was down 25.8% year over year. The reasons cited include the sharp contraction (42%) in imports of capital goods, an inevitable consequence of the Milei government\u2019s crushing austerity policies, falling investor confidence in the government, and persistent high inflation.<\/p>\n
Having exhausted all other possibilities, the Milei government has little choice but to take a more pragmatic, as opposed to dogmatic, approach to foreign relations. As Bloomberg noted months ago, it\u2019s a lesson other leaders in the regions have already learnt:<\/p>\n
Before his rise to power, Brazil\u2019s Jair Bolsonaro criticized China and even visited Taiwan \u2014 only to later welcome executives from Huawei Technologies Co. in the presidential palace and allow the company to participate in Brazil\u2019s 5G network. Back in Argentina, Mauricio Macri, who governed from 2015 to 2019, also sought to cool ties with China, but the plan failed.<\/p>\n
The Bloomberg article also notes that US companies have long struggled to compete against China in Argentina\u2019s strategic sectors. The same goes for other South American countries, including Peru, Brazil and Chile. Things are now so desperate for the US that the commander of US Southern Command, General Laura Richardson, is calling for a Marshall Plan 2.0 for Western Hemisphere nations still struggling to recover from the COVID-19 pandemic. It\u2019s the only way, she says, of keeping Russian, and especially Chinese, influence in the region in check.<\/p>\n
But the US of today cannot compete with the Chinese when it comes to exporting manufactured products or financing the construction of large infrastructure projects abroad. It can hardly produce or maintain its own infrastructure, let alone help others to develop theirs. And there\u2019s another thing the US is sorely lacking in its relations with most Latin American countries: good will. As even Milei himself now admits, dealing with China has its advantages: at least Beijing doesn\u2019t meddle in your internal affairs or set lots of onerous conditions.<\/p>\n
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