The US "backyard" caught fire, Argentina abandoned the US dollar and started RMB clearing bank business.
As early this year, China and Argentina signed an infrastructure financing plan worth US$35 billion. U.S. lawmakers accused President Biden at the time, ignoring China's positive role in South America. The United States has always regarded South America as its "back garden". Recently, Argentina announced the launch of RMB clearing business. South America has taken another step towards the east.
Argentina was once the richest country in South America, but in the last century, it was harvested by the United States through the US dollar tide, and its economic level regressed, and it was occasionally caught in the sovereign debt crisis .
Argentina's local currency peso and the US dollar are anchored, but this year Federal Reserve hikes 36 times, causing the peso to depreciate all the way. From March to June alone, Argentina's foreign reserves were reduced by US$20 billion, and combined with the foreign debt, Argentina's economic situation was very worrying.
China and Argentina have signed multiple local currency swap agreements. By 2019, the RMB had already accounted for more than 50% of Argentina's total reserves ( Jintou.com data).
Now Argentina has opened a RMB clearing mechanism, and financial institutions and enterprises can directly use RMB for cross-border transactions, which means that China-Arab trade does not have to use US dollars anymore. In the turbulent situation like this year's exchange rate , RMB settlement can save a large difference. China's foreign exchange reserves have remained above US$3 trillion for many years, which is the ballast for stable exchange rates. Using RMB settlement can reduce the use of foreign reserves in case of emergency needs.
This year marks the 50th anniversary of the establishment of diplomatic relations between China and Arab countries. In the past 50 years, the trade volume between the two countries has increased from US$6 million to US$17.8 billion, an increase of almost 3,000 times. China maintains its position as Argentina's second largest trading partner ( Global Network data). On this basis, Argentina has also joined the Belt and Road Initiative this year.
Many South American countries have joined the Belt and Road Initiative, but Argentina is definitely closer to Europe and the United States in terms of culture and appearance. Argentina's joining means another country has turned to China because it cannot bear the suffering of harvest, and it also means that Western values are disintegrating.
The United States has not attached much importance to economic support for its so-called "back garden" over the years. It was not until a cooperation between China and Arab countries this year that the United States felt that its "cake" was insurmountable.
When the US soybean harvest was bumper in September this year, Chinese companies ordered 3 million tons of Argentine soybeans, reaching the import volume of the whole year last year in two weeks. In order to generate income, the Argentine government temporarily depreciates peso on soybean farmers. COFCO Futures subsidiary said that in October, the import cost per ton of Argentine soybeans delivered to was $200 cheaper than that of the United States. China can meet its needs by spending low prices, and Argentina has also made money. This win-win situation is exactly the scene that the United States doesn’t want to see the most, that is, China deepens cooperation with Latin America.
2000, US President Bush said during his campaign that Latin America is inseparable from the future of the United States, and South is the fundamental obligation of the United States. However, after the 9/11 incident, most of the United States' attention was to , Middle East , and China became South America's largest trading partner. Looking at the entire Latin American region, China's trade volume is second only to the United States.
Why does China need Latin America so much? This is because we establish the foundation based on the real economy, and the more raw materials, the better, so that domestic industry can continue to operate in extreme situations. Taking the essential lithium resources of for electric vehicles as an example, Argentina, Bolivia and Chile , three South American countries, account for 60% of the world's lithium ore reserves. Among them, Argentina has the greatest development potential and low cost. In 2021, Chinese companies won the development rights of three lithium mines in Argentina.
On November 3 this year, Canada asked three Chinese companies to withdraw their investment from Canadian lithium resource projects. The excuse they found was related to national security, but in fact they wanted to crack down on China's lithium industry. Chinese Ministry of Foreign Affairs urged Canada to stop unreasonable suppression of Chinese companies. Immediately after a few days, Argentina immediately made up its position, and two lithium exploration projects received US$2.2 billion in investment from Chinese companies.
This year's situation in Latin America is destined to not make the United States happy. Brazil's new president Lula is an old friend of China. Argentina has started the business of the RMB clearing bank. There are 15 Latin American countries that are building 50 projects carried out by China Power Group. China's influence in Latin America is becoming increasingly greater.
The United States has always wanted to seek out Latin American countries, but more and more countries value the actual benefits they can obtain. In the past, everyone had no choice but to follow the United States. Now they find that there is still a choice for China, and China is talking about win-win cooperation. South American countries collectively look east, which can only be said to be an inevitable result of history.
