(Recasts after deals signed, adds president's comment)
By Eliana Raszewski
BUENOS AIRES, July 18 Argentina signed deals on
Friday to borrow $7.5 billion from China at a time when the
Latin American country cannot tap global capital markets because
of disputes over unpaid debt.
Among the deals signed, Argentine President Cristina
Fernandez and her Chinese counterpart, Xi Jinping, agreed on a
loan for $4.7 billion from the China Development Bank for the
construction of two hydroelectric dams in Patagonia. China
Gezhouba Group Corp and Argentina's
Electroingenieria SA won contracts last year to build the two
dams, which will have a combined generating capacity of 1,740
The Chinese bank also granted a $2.1 billion loan to help
finance a long-delayed railway project that would make it more
efficient to transport grains from Argentina's agricultural
plains to its ports.
"It's a day we can define as foundational in the relations
between our two countries," Fernandez said after signing the
China is Argentina's second-largest trading partner after
neighbor Brazil. In 2013, Argentina's trade deficit with the
Asian country increased more than 20 percent to $5.8 billion.
Argentina is the world's third-largest exporter of soy and
corn. China is the main buyer of its soybeans.
Xi, China's first president to visit Latin America's
third-largest economy in a decade, arrived in the capital city
of Buenos Aires on Friday after participating in a summit of
emerging economies of the BRICS nations - Brazil, Russia, India,
China and South Africa - in Fortaleza, Brazil, earlier this
He also signed a three-year agreement for an $11 billion
swap operation between the central banks of Argentina and China
that will let the Latin American country pay for Chinese imports
with the yuan currency.
"The exchange will mainly serve to facilitate investments in
the currency of the country providing the funds and to
strengthen the level of international reserves," the Argentine
central bank said in a statement.
Argentina signed a similar deal with China in 2009.
The central bank could ask for the total or partial
disbursement of the 70 billion yuan in exchange for pesos to
invest it, or to exchange it to dollars to fuel its reserves,
said an Argentine central bank official, who spoke on condition
Fernandez's government has imposed stringent import and
capital controls to safeguard dwindling foreign reserves, which
it needs to pay its debts. It has been virtually shut out of
global credit markets since staging a massive 2002 default.
Hopes that Argentina's government might access markets again
soon hinge on the country reaching a deal with holdout creditors
who rejected its debt restructuring in 2005 and 2010.
Fernandez said the deal between the two central banks could
offer "stability in exchange rates at the moment we are, as a
country, suffering speculative attacks by vulture funds."
($1 = 6.2075 Chinese Yuan)
(Additional reporting by Sarah Marsh, Jorge Ataola and Richard
Lough; Editing by Lisa Von Ahn, Richard Chang and Jan Paschal)