BUENOS AIRES (Reuters) - Argentina’s central bank is negotiating with China for a loan of up to $10 billion, which the South American nation hopes to use to replenish its dwindling foreign currency reserves, a local newspaper reported on Tuesday.
Unlike previous trade-specific financing agreements between the two countries, President Cristina Fernandez’ administration would like to use the credit from the People’s Bank of ChinaCNBNK.UL to help pay for maturing sovereign debt and government financing needs, newspaper Pagina 12 wrote, citing unnamed members of the government’s economic team.
Spokespeople at Argentina’s central bank were not available to comment.
Argentina is nearing a currency crisis, partly due to an increase in energy imports, which have failed to keep pace with the flow of dollars brought into the country through exports.
Foreign exchange reserves have shrunk 20.3 percent this year alone to $34.5 billion, according to preliminary data released on Friday.
With little access to international capital markets since its massive 2002 default, and with meager levels of foreign direct investment due to erratic government policies, the government counts on its foreign exchange reserves to pay its debt obligations and finance the country’s dollar requirements.
A loan from China could take some pressure off the government to address those concerns.
China is a top purchaser of Argentine soybean exports. In recent years as it has announced infrastructure investments in key areas of Argentina’s agricultural sector, though many of those projects have yet to leave the drawing board.
The interest rate on the loan is likely to be set at under 7 percent, the report said.
Reporting by Alejandro Lifschitz and Jorge Otaola; Writing by Asher Levine; Editing by Chizu Nomiyama