Nine questions (and answers) to understand how Argentina will open up to trade in yuan

As of this Friday, imports with China will be carried out with the currency of the Asian country, with the aim of strengthening the reserves of the Central Bank.

As of this Friday, Argentina will begin to use yuan to pay for imports, with the aim of avoiding overbilling by companies that obtain foreign currency abroad through intermediaries in Uruguay, the US and Europe, which hits the reserves of the Argentine Central Bank.

The entry into force of this measure, which had already been announced last April, was confirmed by the Argentine Economy Minister, Sergio Massa, from China, a country where he is on an official visit.

With this regime, the South American country seeks to ‘de-dollarize’ imports to protect the reserves of the Central Bank. It happens that a good part of the North American currencies that enter the country must be destined to the payment of the debt with the International Monetary Fund (IMF) and, in addition, the record drought registered in the last months caused a significant drop in the tax collection for exports agrarian.

What does this measure achieve?

The main objective is eliminate intermediation to moderate prices and honest the balance of trade between the two countries.

In addition, it is expected that there will be a more controlled demand for dollars, which will have a “positive impact” on the Central Bank’s reserves, according to the Ministry of Economy on its website.

When do yuan trading begin?

Although transactions with the Chinese currency are expected to begin on Friday, that day the Minister of Economy will offer details about this measure from Beijing, where he will also hold a meeting with former Brazilian President Dilma Rousseff.

Rousseff, since last April, has been the head of the BRICS Bank – made up of Brazil, Russia, India, China and South Africa – which proposes a new financial and security architecture that breaks with the hegemony of the dollar.

What were the previous steps?

To reach this determination, previous measures were taken, such as the establishment of a ‘spot’ or spot market, where the assets are traded immediately.

In addition, a futures market was established in yuanwhich implies that the purchase and sale contracts that are determined in the near future have their price, quantity, and expiration date fixed in the present.

When was it announced?

Last April, after a meeting with the Chinese ambassador in Argentina, Zou Xiaoli, the Minister of Economy announced the activation of a financial agreement with China that would open the door to payment with yuan of $1.04 billion corresponding to imports.

What led to the decision?

It all started when Argentine Customs made inspections and summons to companies that imported goods of Chinese origin. In these investigations it was determined that the products were re-invoiced from Uruguay and Europe to earn foreign currency abroad.

What could the re-invoicing bring about in Uruguay?

This body seeks to determine if re-invoicing from Uruguay “corresponds to a maneuver to avoid paying abroad with yuan” – which would be a “logical situation if China were paid directly” – and thus access the US currency.

In these investigations, 1,790 destinations for 205 million dollars of imports of Chinese products remanufactured in Uruguay were analyzed. In that case, it was determined that ten companies They concentrate 49% of the triangulated operations for an amount of 100 million dollars.

What are the remanufactured products?

It was learned that the main imported goods are “turnkey” machinery and factories in the pharmaceutical, oil, telecommunications and automotive sectors.

What are the numbers in Europe?

According to the data handled by the customs authority, until April 4,803 destinations were analyzed for an amount of 287 million dollars of imports of remanufactured Chinese merchandise from Europe.

The study found that three countries concentrate 60% of operations triangulated for 172 million dollars.

The investigations revealed that none of the Chinese products acquired added value in Europe and there were only re-invoicings because the merchandise arrived directly in Argentina.

What is the role of the US?

According to spokesmen for the Ministry of the Economy, the companies also carry out triangulations from the state of Florida, in the US.

One of the most recent cases is the investigation that the Argentine government opened to the Uruguayan startup company dLocal, based in the US, for allegedly having carried out “improper maneuvers” and transfers of funds abroad for some 400 million dollars, what would constitute a scam to the Argentine State.

According to the Ministry of Commerce of China, that country exports to Argentina less than what the South American nation has as commercial income from the Asian country, which could indicate that there is a triangulation process between Montevideo and limited liability companies (LLC, for its acronym in English) of Florida.

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