China to Hand Argentina US$1 billion in Currency Swap

The deal is part of a US$11 billion Chinese loan. (Photo: Reuters)

The deal was made as part of Beijing's solidarity with Argentina against the so-called vulture funds.

Argentina's central bank head Juan Carlos Fabrega met with Chinese officials on Sunday to nut out the details of a currency swap that could relieve pressure on Buenos Aires.

The deal is part of a US$11 billion Chinese loan secured by the Argentine government in July.

The first billion dollar delivery of Chinese yuan is expected to be handed to Argentina by the end of the year, according to newspaper La Nacion. Argentina could use the yuan to buff up its international reserves, by Chinese goods or convert the cash to dollars.

The Latin American nation's foreign currency reserves are currently sitting at a seven year low.

Argentina is locked in a bitter dispute with a handful of U.S. investment funds, who have refused to accept a controversial bond swap offered by Beunos Aires following Argentina's 2002 default.

“During the meeting, the head of the People's Bank of China conveyed to Fabrega his country's support to Argentina in its dispute with bondholders in a New York Court,” Argentina's central bank stated, according to Reuters.

Last Thursday, Argentina's senate passed a bill circumventing a U.S. court order for the country to pay the so-called vulture funds US1.3 billion, plus interest. The Argentine government has described the U.S ruling as “imperialist,” and accused the funds of speculation.

On Tuesday, Argentina is set to push for a new international regulatory framework for the handling of sovereign debt disputes at the United Nations. The move has the backing of the G77 group, including China.

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