“China is a very interesting trading partner,” said Javier Milei, who just a year ago described the Chinese government as as “assassin.” They “do not make demands, the only thing they ask is that they not be bothered.”
The US continues to lose economic influence in its own “backyard,” particularly South America, with whom China is already the largest trade partner. Even Javier Milei’s 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’s left-wing, authoritarian proclivities, Javier Milei has nothing but fond words for the US’ main strategic rival today.
Alarm bells began flashing in Washington when news emerged that a delegation of senior Argentine ministers, including Karina Milei, the president’s sister who is also general secretary of the presidency, Economy Minister Luis Caputo and Foreign Minister Diana Mondino, had met with China’s 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:
The Biden administration had thought Milei’s government was beyond Xi Jinping’s 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’s central bank reserves as well as facilitate investments by Chinese companies in lithium and copper, two minerals that Washington considers globally strategic.
“We have to be careful with how we handle this relationship,” U.S. Ambassador to China Nicholas Burns said of diplomatic ties between China and the US. “We’re systemic rivals, and I think we’ll be systemic rivals for the next decade, maybe even beyond.”
And Burns added so that there were no doubts: “China is aiding and abetting the Russian war machine. There is no indication that it will move away from its ‘no limits’ partnership with Russia. The Chinese like to say they are neutral — in the war against Ukraine — but the evidence suggests otherwise. Beijing is sending much-needed components to Russia, on which the Kremlin depends for its ongoing war effort.”
In this context, Milei’s strategy with China to secure the Central Bank’s 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’s successor in the Oval Office: it is a bipartisan position, supported by both Kamala Harris and Donald Trump.
Tellingly, the Argentine government tried to play down the meeting, tagging it on to the end of a Foreign Ministry press release, while China’s Foreign Ministry made quite a big deal out of it, dedicating a whole press release to the matter.
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…
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 “Taiwan independence”. 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.
From Communist “Assassin” to “Very Interesting Trade Partner”
The significance of Milei’s 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 “global partner” of NATO, months after cancelling Argentina’s membership of the BRICS-plus alliance. It has offered to send weapons to Ukraine while pledging total support for Israel’s genocidal war crimes. In an interview with Bloomberg just over a year ago when still on the campaign trail, Milei referred to the Asian nation as an “assassin”:
“We do not make pacts with communists… I would not promote relations with communists, nor with Cuba, nor with Venezuela, nor with North Korea, nor with Nicaragua, nor with China… People are not free in China, they can’t do what they want and when they do, they get killed. Would you trade with an assassin?
In his chat with Tucker Carlson, Milei said:
Not only am I not going to do business with China, I am not going to do business with any communist… I am a defender of freedom, peace and democracy. The Chinese don’t fit in…
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.
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’s central bank and to dollarise Argentina’s economy. In relation to China, Argentina’s second largest trade partner, he quickly clarified that he wouldn’t stand in the way of private business deals between Argentinian and Chinese companies.
“We are liberals,” he said. “And if people want to do business with China, they can.”
But there is a world of difference between Argentine companies doing business with Chinese companies and Argentina’s government pushing for closer economic ties with Beijing. This is precisely what Milei said he would never do.
Softly, Softly
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 “China values its relations with Argentina” and is “ready to work with Argentina to continue nurturing our friendship and contribute to each other’s development.” When Milei rejected Xi Jinping’s personal invitation to Argentina to join the BRICS grouping, Beijing said nothing; it just waited.
That softly-softly approach is now paying dividends. As we reported in May, when Argentina’s central bank desperately needed to churn out new 20,000 peso notes in order to keep up with the country’s 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’s Republic of China.
The move, understandably, raised some eyebrows among members of Milei’s La Libertad Avanca (Freedom Advances) coalition party. As an article in Clarín noted, some questioned the wisdom of entrusting the manufacturing of a resource as “sensitive and strategic” as the country’s national currency to a company that is essentially owned by China’s “assassin” government. Today, Milei has a very different set of words to describe the Chinese government.
“China is a very interesting business partner,” he said in an interview on Sunday. “They do not demand anything, the only thing they ask is that they not be bothered.”
In others words, general non-interference — the diametric opposite to how the US has traditionally engaged with its Latin American neighbours. Milei was also seemingly impressed by Chinese efficiency, telling Giménez, “We had a meeting with the ambassador (Wang Wei) in June, the next day they unlocked the swap,” 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.
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’s 33 sovereign nations — with the notable exception of the US and Canada.
In 2021, Mexico’s now-former President Andrés Manuel Lopéz 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.
While that hasn’t happened, which is probably a good thing, CELAC has gained in importance in the last few years, especially following the OEA’s role in the coup d’état 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’s invasion of Ukraine, much to the chagrin of EU negotiators.
Next up on the agenda will be the China-CELAC forum, to be held in Beijing in January. Not 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’s account of his recent meeting with the Argentine ministers in New York, “Argentina is ready to actively participate in cooperation between LAC and China, which will help CELAC countries achieve further development.”
Not only will Milei be lobbying for Argentina’s economic interests in Beijing, he will be doing so from a forum that was inaugurated by Hugo Chavez. And according to Chavez’s successor, Nicolás Maduro, CELAC is now in the sights of the US — 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 “is not kneeling to its interests.”
Saving Argentina’s Economy
This last-ditch U-turn is geared at trying to save Argentina’s economy from the grinder Milei’s 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 Fernández de Kirchener. That swap is now the largest source of foreign reserves in the central bank’s 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’s gold reserves.
China is also Argentina’s second largest trade partner, after Brazil. Despite attracting interest from the likes of Elon Musk and BlackRock’s Larry Fink, the Milei government’s strategic realignment with the US and Israel appears to have brought it little in the way of new funds.
Meanwhile, trade between China and Argentina the two countries has declined sharply since Milei’s 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’s strategic sectors, including lithium and gas — sectors that US government and corporations also have their eyes on — as well as the construction (stalled since 2022) of Argentina’s nuclear plant, Atucha 3, and the Néstor Kirchner-Jorge Cepernic hydroelectric plant, the largest bilateral infrastructure project ever attempted between the two countries.
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’s crushing austerity policies, falling investor confidence in the government, and persistent high inflation.
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’s a lesson other leaders in the regions have already learnt:
Before his rise to power, Brazil’s Jair Bolsonaro criticized China and even visited Taiwan — only to later welcome executives from Huawei Technologies Co. in the presidential palace and allow the company to participate in Brazil’s 5G network. Back in Argentina, Mauricio Macri, who governed from 2015 to 2019, also sought to cool ties with China, but the plan failed.
The Bloomberg article also notes that US companies have long struggled to compete against China in Argentina’s 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’s the only way, she says, of keeping Russian, and especially Chinese, influence in the region in check.
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’s 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’t meddle in your internal affairs or set lots of onerous conditions.
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Pathetic. But obviously a major triumph for China. I hope they patiently hear him out, as is usually their way, but then leave him and Argentina hanging. Let them sort out their own mess, especially after both insulting and breaking agreements with China.
What Milei wants from China is the extension of relatively cheap credit so he can use the money to pay high interest loans to the IMF and other Western financial institutions, and then probably even refuse to pay China back. (There is an episode of Guns and Butter from 2016, number 339, titled “The New Global Financial Cold War”, where Michael Hudson is interviewed and he describes how the IMF had recently declared basically that debts don’t have to repaid if they are owed to Russia or China.)
If the Chinese were to go along with that, they would be fools. And that they are not. While I for some reason can’t find the article now, I can swear I read about a Chinese firm, quite early in the Milei presidency, actually withdrawing (as in taking bringing their contractors and machinery home) from some long-stalled hydroelectric project in Argentina, if not the Néstor Kirchner-Jorge Cepernic dam mentioned in the article then a different one. And I don’t recall any Chinese entity doing anything like that against Brazil under Bolsonaro, although in hindsight, it was probably the right move not to burn bridges in that case.
Brazil is a different country however, and it was very funny watching Bolsonaro so quickly falling in line after his campaign rhetoric like for example the line which went more or less “our allies will be democracies like the US, Israel, Ukraine, Colombia, Taiwan, not dictatorships like Venezuela, Cuba, Russia, China, Iran”. You can find pictures of him later hosting and visiting BRICS summits holding hands with Putin and Xi and seemingly beam with joy, and where if I didn’t know better, I would think it was authentic.
Quite obviously there was a Brazilian deep state dynamic – from my perspective in a good sense – where an ingrained bureaucracy and powerful business interests told him that “nope, we don’t care what you campaigned on, you are not going to torch our relationship with China or Russia. You are going to take good care of these relationships, which are very important to us, and you are going to look happy while doing it.”
Others here no doubt know Argentina and Latin America better than I do, but I can’t really see the same deep-rooted structures in place in there as in Brazil.
https://fred.stlouisfed.org/graph/?g=1usfX
August 4, 2014
Real per capita Gross Domestic Product for Argentina, Brazil, Chile, Mexico and China, 1977-2023
(Percent change)
https://fred.stlouisfed.org/graph/?g=1usg2
August 4, 2014
Real per capita Gross Domestic Product for Argentina, Brazil, Chile, Mexico and China, 1977-2023
(Indexed to 1977)
Many thanks for this very interesting piece! There is more on the relative lack of Chinese conditionality here: https://www.phenomenalworld.org/analysis/anarcho-capitalism/
As a major exporter of soyabeans, cereals, animal fodder, etc., Argentina is in direct competition with the very powerful US agricultural sector, but it complements the needs of China, and being in the southern hemisphere helps out of season in China, and underpins Chinese food security all year round. This is one of the reasons why Argentina (like Australia and New Zealand) functioned as a ‘farm’ for Britain in the 19th and early/mid 20th centuries: agricultural exports from the southern hemisphere were not always in direct competition with foodstuffs produced at home (though there was certainly direct competition in the beef market after the Vestey’s development of refrigerated shipping after 1890), and the ‘free breakfast table’ could be secured British without necessarily damaging domestic agriculture in the way heavily discounted cereals from the American prairies eviscerated the UK’s efficient farm sector after 1870 (most especially after 1879, hitting the eastern counties of England especially hard).
Argentina was also seared by the 2012 decision that it must continue to pay the vulture holdouts, as described in this excellent volume published earlier this year: https://press.georgetown.edu/Book/Default
So, with the relative lack of conditionality, complementarity and, perhaps, less strategic and juridical ‘suasion’, the penny has now dropped for even the dimmest and most doctrinaire Argentine policymaker. All told, the US simply has far less to offer Argentina than China. Moreover, why shouldn’t any developing nation located in the Global South in urgent need of credit want to play off the US against China after a period of relatively high interest rates, the effect of which has had echoes of the Volcker shock?
https://www.nytimes.com/2016/04/01/opinion/how-hedge-funds-held-argentina-for-ransom.html
March 31, 2016
How Hedge Funds Held Argentina for Ransom
By Martin Guzman and Joseph E. Stiglitz
Perhaps the most complex trial in history between a sovereign nation, Argentina, and its bondholders — including a group of United States-based hedge funds — officially came to an end yesterday when the Argentine Senate ratified a settlement.
The resolution was excellent news for a small group of well-connected investors, and terrible news for the rest of the world, especially countries that face their own debt crises in the future.
In late 2001, Argentina defaulted on $132 billion in loans during its disastrous depression. Gross domestic product dropped by 28 percent, 57.5 percent of Argentines were living in poverty, and the unemployment rate skyrocketed to above 20 percent, leading to riots and clashes that resulted in 39 deaths.
Unable to pay its creditors, Argentina restructured its debt in two rounds of negotiations. The package discounted the bonds by two-thirds but provided a mechanism for more payments when the country’s economy recovered, which it did. A vast majority of the bondholders — 93 percent — accepted the deal.
Among the small minority who refused the deal were investors who had bought many of their bonds at a huge discount, well after the country defaulted and even after the first round of restructuring. These kinds of investors have earned the name vulture funds by buying up distressed debt, then, often aided by lawyers and lobbyists, trying to force a settlement…
Many thanks! And where the UK Supreme Court led (https://www.supremecourt.uk/cases/docs/uksc-2010-0040-judgment.pdf) the US Supreme Court followed (though perhaps not quite consciously: https://web.archive.org/web/20141018154156/http://www.supremecourt.gov/opinions/13pdf/12-842_5hdk.pdf). As you may know, the chief vulture was NML (Elliott Capital), i.e., Paul Singer, a leading GOP donor.
I also found this recent work useful: https://www.routledge.com/Sovereign-Debt-Restructuring-and-the-Law-The-Holdout-Creditor-Problem-in-Argentina-and-Greece/Grund/p/book/9781032422367?srsltid=AfmBOop39rsRSNlq8ayflN-oCdv7SFHl1v-y8O4mI3XcjN7F7RZMFlbt. There is an extended discussion of the subject of sovereign immunity, which was at the heart of the UK and US litigation.
Perhaps the only good thing to have come out of the UK litigation is that it will have helped finance the final volumes of Jonathan Sumption’s magisterial history of the Hundred Years’ War, as well as his transfer from the bar to the Supreme Court bench.
Do nothing. China wins.
It doesn’t take a quantum physicist to know what Argentina needs—either visit it or watch some travel documentaries.
Beyond the basic human needs, Argentina sorely needs infrastructure improvements—particularly rail infrastructure.
If one ever wondered what would it be like if a modern society just was frozen in time (economic growth wise), it’s Argentina. It’s like all investment stopped in 1968 (judging by the Brutalist/concrete architecture).
There is a longstanding theory that Argentina has suffered not from insufficient infrastructure, but from a pattern of infrastructure that cemented in its status as a commodity producing nation, not an industrial nation.
Argentina has (or at least had) a very impressive late 19th and early 20th century railway network, but it was almost entirely based on transporting cattle and other commodities from the interior to Buenos Aires. It lacked either a natural interior transport corridor (such as an easily navigated river or canals), and the infrastructure that was built made exports and imports easy and cheap, but did not facilitate internal nodes of development. This had the political effect of creating a wealthy class based on landowning and extraction, rather than an industrial capitalist class. This prevented it making what has appeared at several times in its history what seemed the inevitable jump up into developed country status with a GDP to match.
This, according to the theory, effectively locked Argentina into a commodity economy with no way of working up the value chain, at least not without a determined centralised effort (as happened in, say, South Korea), mostly due to the political pressure of the landowning class.
So in the short term, Argentina prospered, as long as there was a lot of high value commodities coming through. But it meant that from its heyday, when it was one of the richest countries on earth (many believed in the late 19th Century it could match or exceed the US), to continually spluttering along in the upper middle income category, with every sign that it could stagger downwards.
Milei of course, is just an inevitable result of the long term chaos and political gridlock. Like most midsized country leaders who see themselves as ‘players’, he will pragmatically try to play off all the main power players against each other, and someone told him China has lots of surplus capital it needs investing, so he’s changed his tune. No doubt he sees himself as playing a smart game, and hopes to extract concessions from the US along with some cheap loans from China. But he will soon find out he has a very weak hand.
“If one ever wondered what would it be like if a modern society just was frozen in time (economic growth wise), it’s Argentina. It’s like all investment stopped in 1968 (judging by the Brutalist/concrete architecture).”
Terrific comment.
‘As a major exporter of soyabeans, cereals, animal fodder, etc., Argentina is in direct competition with the very powerful US agricultural sector, but it complements the needs of China’
That is very interesting that and makes me reach for my tin foil hat. Supposing that Milei won the election and came out how devoted he was to the US and Israel while disliking any fellow South American nation that even looked leftist, that he would have expected a boat load of investments from those countries to underpin Argentina while he did his “reforms.” But from Nick’s post, that is not happening and Milei was left spinning in the wind forcing him to pull his head in and go see the Chinese for aid. Could it be that certain interests in the US wanted Milei to wreck Argentina so that they could go in and buy everything up cheap in Fire-sale Argentina and would no longer be a competitor with the US? Even if that worked directly against US strategic interests in Argentina?
Could Xi mediate the Longshoreman contract?
“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’s gold reserves.”
Just spit ballin’ and will probaly be told I’m crazy but…what if China or BRICS did an experiment: offer to pay off Argentina’s IMF loan for them to join BRICS?
Or some fund for that purpose for members who may have that problem?
Thanks again Nick for keeping us updated on events in South America. Apparently reality trumps anti-“communist” idealism.
Interesting that even Milei admits that the Chinese “do not demand anything”. If the Chinese are running some super sneaky gotcha campaign to eventually make all these countries subservient as the West sometimes likes to claim, they sure are doing well at hiding it. It does seem like China genuinely wants to help other nations, knowing that cooperation also boosts their own economy. I remember Varoufakis talking to one Western woman who was worried about possibly nefarious Chinese influence, and he explained how China gladly reworked the deal they had with Greece over Piraeus when the original deal didn’t work out for the Greeks as well as they would have liked. The US just puts the screws to countries it “helps”. Or bombs them to dust.
I read John Perkins’ Confessions of an Economic Hitman years ago, and the MO he describes there is still in operation for the US. China has apparently learned from others’ mistakes.
The world is witnessing the steady US decline. Lobbies seem to control and dictate economic and foreign policy – none to any nation’s advantage, except the oligarchy. Recent and active evidence include supporting the unwinable wars in the Ukraine and worse in Israel, where it’s complicit in the genocide. The Gray Zone has a piece on leaked documents showing US finger prints all over the recent coup d’etat in Bangladesh. African countries have forcibly sent US military installations packing, even after these outfits helped architect successive government overthrows that placed them in power to begin with.
Recent Administrations appear determined to continue outsourcing the economy to BlackRock’s Larry Fink a product of Neoliberal policies. In the vast emptiness of a rational foreign policy, countries don’t have much of a choice, and unfortunately wealthy China is currently filling the gap. China is not a good alternative for anyone, except China’s Politburo; thus, Millei’s “to do, or not to do” shuffle dance.
“China is not a good alternative for anyone, except China’s Politburo…”
Evidently the 53 African heads of state who just spent a week in Beijing working on the years of China-Africa economic partnerships and the Belt and Road relationship were unaware of the problems that building railroads and the like with China presents. Zambia might care to know why the new Chinese program to end cholera is a problem. Madagascar might like to know why new Chinese hybrid rice fields are a problem. What should Ethiopia know about problems with the free trade status they and 32 other African countries have with China?
Yep, it’s a time will tell situation with what the multipolar world is really going to look like for the masses.
All of this turmoil is going to affect it. The BRICS meet will be interesting.
For now, it’s known that other countries are trying hardest to set up structures that protect their corporations and wealthy from sanctions.
What it means for the rest…stay tuned.
SNICKER:) crank libertarian drives country into the ground with crank libertarian economics, then finds out capitalism will not work without socialism, and comes begging to the communists for a bailout!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
well duh, we have money, we can just go out and by the stuff we need.
“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’s 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’t meddle in your internal affairs or set lots of onerous conditions.”
Economic power in argentina is mainly in the hands of a very small number of families, who led Milei to the presidency. Just as in other countries the super rich find more and more reasons to do business with china and less and less with the usa and europe. It is not a question of more or less democracy but of convenience and it is the super rich who have more weight, in argentina and elsewhere.
Loosing the super rich? Yeah, that’ll get some attention. Loosing everybody else? Not to worry, American elites don’t care about non super rich, even in their own country.