By Dieago López Beltran | 2023-10-24

BUENOS AIRES -- Addressing the challenges of inflation, surging poverty rates exceeding 40% of the population and an escalating debt crisis, the candidates in the Argentine presidential elections held Sunday (October 22) shared a common focal point: China.

Following the initial round of elections, Argentina's economy minister, Sergio Massa, and the unconventional outsider, Javier Milei, emerged as the victors.

They are now set to go head to head in a runoff, highlighting the stark contrast between their visions for the country, as clearly revealed by the election results.

Latin America's third-largest economy grapples with triple-digit inflation, a consequence of decades marked by recurring fiscal crises, debt burdens, financial mismanagement, and a volatile currency.

Massa, a figure representing the ruling center-left Peronist coalition, surpassed expectations by securing the top position with 36.6% of the vote.

Milei, a Libertarian candidate who made headlines by brandishing a chainsaw at his rallies while pledging to slash public spending and advocating for dollarization, secured a notable 30% of the vote.

Throughout the campaign leading up to the first round of elections, both candidates distinctly articulated their geopolitical preferences.

In a September 14 interview with American commentator Tucker Carlson, Milei declared his stance against engaging in business with China. He affirmed his reluctance to cooperate with governments like Russia's, which he likened to a communist regime.

​​This was not the first instance in which Milei advocated severing ties with Beijing and refraining from deals with "communist" entities in the times ahead.

He also leveled accusations against China, alleging that the nation sought to suppress its own citizens who yearned for freedom.

Concern among businessmen

Milei's stance has raised concerns within a significant segment of the Argentine economic establishment and government-affiliated media. This unease stems from China's status as the country's second-largest trading partner, just behind Brazil. Moreover, both China and Brazil belong to the BRICS bloc, a coalition of emerging economies.

Argentina, along with five other countries, this year committed to joining the bloc, effective in January 2024.

The original BRICS countries are Brazil, Russia, India, China and South Africa.

To address lingering uncertainties, Milei has emphatically stated his intent to align with the United States and Israel in matters of geopolitics. However, some of his prominent opponents, including leaders of key business sectors, are left wondering about the prospective alliances that a Libertarian-led government might pursue to offset the disruption in relations with its two primary business partners.

Genuine concerns arise when one considers the multitude and diversity of multimillion-dollar collaborative initiatives between China and Argentina, which are presently in progress and heavily reliant on substantial Chinese financial support.

These include the Kirchner-Cepernic hydroelectric dam megaproject in the province of Santa Cruz, the extensive overhaul of the Belgrano Cargas railway system and the construction of the Atucha III nuclear power plant, as well as various undertakings in solar energy and lithium extraction within Argentina's northern provinces, among others.

Reliance on financial support

Argentina's monetary policy has progressively grown more intertwined with Beijing.

Under the recommendation of Massa, the ruling party candidate and economy minister, the government further augmented a currency swap agreement originally established in 2020 to a total of 130 billion CNY (equivalent to approximately $18 billion) in June.

This agreement enabled Argentina to mitigate a decline in foreign currency reserves, facilitating debt repayment to external creditors during a period of dollar scarcity, rampant inflation and devaluation of the peso.

Similar to Venezuela, Ecuador and various nations in Africa and Asia that have engaged in agreements with China, Argentina could potentially find itself ensnared in China's "debt-trap diplomacy." This practice entices countries into unsustainable debt, thereby granting China disproportionate influence. As China emerges as Argentina's primary financier, the risk of such entanglement becomes more pronounced.

The strengthening of connections between Latin America and China is a longstanding progression that is gaining significant momentum. Notably, Chinese development banks have emerged as primary creditors for multiple governments in the region, surpassing the influence of multilateral financial institutions. This revelation comes from a collaborative report released in February by the International Service for Human Rights and the Collective on Chinese Financing and Investment, Rights Human, and Environment (CICDHA).

The report additionally underscores China's significant involvement in the Santa Cruz River hydroelectric project, which has reached the halfway mark of its construction. Valued at an estimated $4.7 billion, this project ranks as Argentina's third-largest hydroelectric initiative and represents the largest endeavor to be both financed and constructed by Chinese enterprises in Argentina.

The project faces criticism for hastily conducting an environmental impact study and failing to comprehensively assess its effects on the freshwater reserves and local wildlife, as well as for neglecting the risks associated with its construction.

Additionally, the initial project did not encompass an impact study for the extra high-voltage power lines associated with the undertaking, as detailed in the report.

Whether Massa or Milei wins, Argentina will maintain its status as a key strategic target in Latin America for Xi Jinping's government.