By Christiaan van Huyssteen (@cvh23)
Argentina, which defaulted on its debt in July, will receive the first tranche of a multi-billion dollar currency swap operation with China’s central bank before the end of this year, the South American country’s La Nacion newspaper reported on Sunday.
The swap will allow Argentina to bolster its foreign reserves or pay for Chinese imports with the yuan currency at a time weak export revenues and an ailing currency have put the Latin American nation’s foreign reserves under intense pressure.
La Nacion said Argentina would receive yuan worth $1 billion by the end of 2014, the first payment of a loan worth a total $11 billion signed by Argentina’s President Cristina Fernandez and her Chinese counterpart in July.
Serial defaulter Argentina has now found an interesting new backer, and what makes it interesting is that the currency swap will take place in Yuan, not dollars. This will allow Argentina to pay for exports in Yuan. China seems to be finding new trading allies who are willing to ‘de-dollarise’. This is a very small step towards the demise of the dollar as the world reserve currency.
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