Where next for Argentina-China relations?

Since taking power in December, the government of far-right libertarian Javier Milei has signalled some potentially abrupt turns in Argentina’s foreign policy, which could reshape its relationship with China.

The past two decades have seen the countries continually strengthen their bilateral ties, leading to growing trade, diplomatic cooperation, and increased investment and financial assistance from China. However, President Milei and members of his government have expressed a desire to seek closer alignment with the United States, and weaken relations with China.

Given China’s economic importance as Argentina’s second-largest trading partner, and the destination for close to 10% of its exports, the Milei government’s potential pivot has raised alarm bells for some analysts. But the structure and long-term ties of trade and investment between the two countries suggests relations could remain durable.

Diálogo Chino spoke with several experts in Argentina on the possible impacts of the government’s ambiguous signals on China, and the future of relations.

Decisions and gestures

Perhaps the most concrete development in Argentina-China relations since the Milei era began is his government’s decision to pull out of the planned expansion of the BRICS emerging economies bloc, of which China is a member alongside Brazil, Russia, India and South Africa.

Argentina had been set to join BRICS in January after being invited in 2023, with Brazil and China the driving force behind the country’s candidacy. In a letter to the bloc in late December, Milei said that Argentina’s current foreign policy priorities differ from those of the previous government of former president Alberto Fernández.

In mid-January, the new foreign minister Diana Mondino met with the Chinese ambassador to Argentina and said “there is no doubt about the importance of trade between the two countries.” In turn, the ambassador affirmed that he hopes “friendship and cooperation” between the two countries will continue under Milei.

However, just two days after this meeting, Milei reposted controversial comments on X, formerly Twitter: “The Left wants you to have Cuba’s salary, North Korea’s freedom, Chinese justice and Venezuela’s abundance.” The TV pundit-turned-president rose to fame by rallying against left-wing politics and governments.

Since taking office in December, Milei’s government has delivered mixed messages on relations with China, with his often aggressive personal positions balanced by ministers’ more diplomatic language in bilateral meetings. (Image: Florencia Martin / Alamy)

When asked about the situation in a subsequent press conference, Chinese foreign ministry spokesman Wang Wenbin commented that China is “ready to work with Argentina to cement political mutual trust, enhance high-quality Belt and Road cooperation [and] tap on our complementary advantages”.

After this series of ups and downs in the first few months of the Milei government, Mondino and Chinese foreign minister Wang Yi met in February on the sidelines of the Munich Security Conference. The pair took the opportunity to reiterate their commitment to maintaining strong relations.

The business relationship

Last year, China was the destination for 7.9% of Argentina’s exports by value, totalling US$5.27 billion. It was the third-largest buyer, behind Brazil and the United States. Meanwhile, China was the source of 19.7% of Argentina’s imports, totalling US$14.5 billion, behind only Brazil.

Soy products, beef, barley, shrimp, prawns and lithium carbonate are among Argentina’s main exports to China. Imports from China include components for mobile phones, televisions and other electrical appliances, cars and auto parts, fertilisers and electric generators.

Despite the bumps since Milei’s rise, the countries’ agricultural relationship in particular seem unlikely to be impacted given its importance to both sides, suggests Mario Quinteros, an Argentine former diplomat in China: “Milei has had unconstructive attitudes towards China. However, it is necessary to bear in mind that China operates with a long-term perspective and that in terms of trade there are mutual benefits: Argentina’s agricultural exports improve its trade balance but are also important to ensure China’s food supply.”

Gonzalo Ghiggino, a researcher at Argentina’s National Scientific and Technical Research Council (CONICET), argues that good relations with China are not optional for Argentina: “Most likely, Milei will keep the relationship on autopilot. On the trade issue there are certain risks, because while China may find new suppliers of soy and meat in Brazil, Australia and the United States, Argentina would not find an alternative buyer to China.”

On trade, economist Julio Sevares, who has written on the implications of US-China tensions for Argentina, adds that the country must tread carefully: “There are negotiations for the entry of products into China, such as Argentine wheat, which has just been approved after 25 years of negotiations. A deterioration in political ties could have potential commercial impacts.”

Cooling off?

Maria Francesca Staiano, coordinator of Chinese studies at the National University of La Plata, recalls that former president Mauricio Macri (2015-2019) also proposed prioritising alliances with the United States and Europe, and called Argentina’s links with China into question during his election campaign – although not as aggressively as Milei, who labelled China an “assassin”.

Due to the countries’ deep economic interdependence and existing cooperation agreements, Macri was ultimately unable to bring much distance into the relationship. In fact, in 2017, he attended the Belt and Road Forum in Beijing, although Argentina would not join the initiative until 2022, under his successor Fernández.

“Even though Milei is a much more unbalanced person, the same thing will happen: after an initial cooling-off phase, the situation will gradually settle down again,” says Staiano.

Jorge Malena, director of the postgraduate course in China studies at the Catholic University of Argentina, thinks similarly. Although Milei’s statements during the presidential campaign and at the beginning of his government signalled a desire to weaken the relationship between the two countries, Malena says “the reality shows that during the beginning of the administration, there has been a change in stance vis-à-vis Beijing.”

In late December, amid uncertainty over the new government’s stance, China suspended the US$6.5 billion currency-swap line that had been negotiated with Argentina’s previous administration.

In total, Argentina has an US$18 billion currency-swap line with China, which has allowed it to pay off part of its international debts. During 2023, Argentina was able to access US$5 billion of this.

“Without that tranche of the swap, it would have been impossible to contain the fall in GDP to 1.1% and unemployment to its lowest level since 1991, given the historic drought,” explains the former vice-president of the Central Bank of Argentina, Jorge Carrera. (He refers to the three-year drought that severely impacted the country’s agricultural output.) “I think it would be a mistake for this government to neglect the relationship with China and for that to affect this source of financing.”

No further news has yet emerged on the status of the swap line’s renegotiation.

Investments

China is increasingly investing in Argentina’s mining sector. Of the 12 projects with Chinese capital in the country, seven are in lithium, with the remainder covering gold, silver, copper, lead and iron ore. According to Ghiggino, these operations are “unlikely to be in danger, because lithium is of a strategic nature”.

Major lithium investment includes Chinese mining giant Ganfeng Lithium’s commitment to develop the Mariana project, and the agreement between Lítica Resources and Ganfeng to acquire the Pozuelos Pastos Grandes project, both located in the northern province of Salta.

Other Chinese mining investments include: Shandong Gold’s 50% stake in the Veladero gold deposit; Zijin Mining’s development of the Tres Quebradas lithium project in Catamarca province; and steelmaker Tsingshan’s partnership with French mining group Eramet to develop a lithium plant in the Centenario-Ratones salt flats.

For Diego Guelar, who served as the Argentine ambassador in Beijing between 2015 and 2019, “China is not going to be tempted by short-term declarations and instead a long-term vision is going to prevail.” But he cautions that “political ups and downs will affect the dynamics of infrastructure investment”.

The uncertainty surrounding infrastructure works with financial support from China could be cause for concern amid an abrupt drop in domestic funding for public works. Announced by Milei’s government, this drop is part of its fiscal adjustment plan. “The financing of infrastructure investments could fall, in a context where it is more necessary than ever,” warns Gonzalo Ghiggino. Guelar, meanwhile, highlights the potential of Argentine provinces to make their own cooperation agreements with their Chinese counterparts in this area.

The largest Chinese infrastructure investment project in Argentina is currently the construction of two hydroelectric dams on the Santa Cruz River, in the southern province of the same name. Although works began in 2015, political and macroeconomic instability have caused numerous delays to their progress, with the works still less than halfway to completion.

Aerial view of the Jorge Cepernic hydroelectric power plant under construction in Santa Cruz province. Along with the Néstor Kirchner dam, the delayed project – the biggest Chinese infrastructure investment in Argentina – has faced criticism over its feasibility. (Image: Alamy)

On renewable energy, China is also a key partner for Argentina. Among the most notable projects financed by Chinese entities are the Loma Blanca (Chubut) and Miramar (Buenos Aires) wind farms, operated by the firm Goldwind, and the Vientos del Secano project (Buenos Aires), by Envision Energy. In solar, the most significant development is the Cauchari solar farm, the largest in the country, for which the northern province of Jujuy has reportedly struck an agreement with Shanghai Electric Power Construction to expand the project this year.

Another notable aspect of the bilateral relationship is Argentina’s transport sector. Among the most important projects is the rehabilitation of the Belgrano Cargas freight railway line, which is being carried out by the Chinese company China Machinery Engineering Corporation (CMEC). The company has already disbursed almost US$2.5 billion towards the project.

Meanwhile, CMEC has shown interest in financing the reactivation of the Tren Norpatagónico railway, which would connect the vast Vaca Muerta oil and gas field with the port of Bahía Blanca.

During his trip to China in October 2023, Argentina’s then-president Alberto Fernández met with executives of CMEC, the Chinese company in charge of the country’s Belgrano Cargas freight railway project (Image: Casa Rosada, CC BY 2.5 AR)

These investment projects are part of the political agreements reached with China during the previous government. They include financing of US$14 billion under the countries’ Strategic Dialogue for Economic Cooperation and Coordination mechanism, and a second package of US$9.7 billion that Chinese entities would invest following Argentina’s joining of the Belt and Road Initiative.

“With regard to investments, those originating in agreements between states or public bodies, which include a contribution from the Argentine state, have had difficulties for years and have suffered delays and cancellations due to the lack of local funds,” says the economist Sevares. His outlook for the future is not optimistic: “The situation will worsen in the immediate future due to the fiscal adjustment programme being carried out by the current government.”