BUENOS AIRES
Chinese President Xi Jinping on Friday signed trade and investment agreements with Argentina, which sorely needs investment to expand its energy and transport capacity after years of running at overcapacity.
Xi signed the deals with Argentine President Cristina Fernandez de Kirchner in Buenos Aires, the latter’s administration said in a statement Friday.
China will put $4.7 billion toward construction of the Nestor Kirchner and Jorge Cepernic hydropower plants in the southern province of Santa Cruz. China’s state-owned construction and engineering company Gezhouba Group is leading the projects, which will have a combined 1,740 megawatts of capacity.
Argentina needs financing to expand energy and transport capacity after years of buoyant growth led to supply shortages and constraints in moving goods.
Latin America’s third-largest economy grew by an average of 8 percent per year between 2003 and 2011 before slowing in 2012 and 2013. But investment didn’t keep pace because the government failed to regain access to global financial markets after a 2001 default on $100 billion, a debt that it has yet to fully settle.
Indeed, the country could go into default again at the end of July if it does not settle with creditors that won a lawsuit to collect repayment on bonds left over from the default.
The wobbly financial situation has increased borrowing costs for investment in the country, leading investors to suspend projects and the government to look elsewhere.
Along with the hydropower investment, China agreed to lend Argentina $2.1 billion for the expansion of a cargo train and to help build a nuclear power plant. The China National Development Bank will provide funds to Argentina’s state-run energy company, YPF, for stepping up drilling for oil and natural gas, including in shale rock formations estimated to hold huge resources.
Argentina and China also agreed to swap up to $11 billion in their respective currencies over a three-year renewable period. This is expected to help the South American country shore up its foreign reserves, which have dropped to a seven-year low of $29 billion this year. The country relies heavily on its reserves to pay the national debt and cover imports.
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