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The Argentina-China Relationship at Its Worst Historical Moment

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The Argentina-China Relationship at Its Worst Historical Moment

It was clear that the election of Javier Milei was the worst possible scenario for China, and the nightmare became a reality in the worst way.

The Argentina-China Relationship at Its Worst Historical Moment

Argentina’s President Javier Milei (left, at podium) gives remarks during a ceremony marking the donation of a U.S. C-130 aircraft to Argentina, Apr. 5, 2024.

Credit: U.S. Embassy Argentina

If there is one area where Argentina’s President Javier Milei cannot be faulted, it is the coherence and consistency of his libertarian ideas since he started his political career. As expected, Milei also brought that ideology to foreign policy.

Milei understands the world in a binary way, with an ideological perspective typical of the Cold War. It’s a world that ceased to exist in 1989, but which is still very much alive for Milei. It’s an almost existential need for him, given his deep ideological convictions. In that sense, aggressively pursuing alignment with the United States, complete with overacting that nobody asked for, is a totally logical matter based on his rudimentary and biased vision.

China has no place and will not have one in Milei’s world. And there could never be recognition, at least publicly, of issues such as the economic success of this technological superpower and all that China represents as a strategic partner for Argentina. The world for Milei continues to be divided between the West, with its morally and aesthetically superior values and ideas, on one hand, and on the other, a group of decadent and murderous communists. His foreign policy is that simple and elemental.

During the recent visit to Argentina by General Laura Richardson, head of the U.S. Southern Command, Milei expressed what would be a new doctrine of foreign policy. In his speech, the president associated defense of Argentina’s sovereignty with alignment with the United States. 

“Strategic alliances cannot simply be based on economic interests,” said Milei, clearly referring to the relationship with China. This signifies an explicit abandonment of pragmatism in foreign policy.

Argentina’s Complex Relationship With China

It can be said that the bilateral relationship between Argentina and China is at its worst historical moment since diplomatic relations were established in 1972. Even during the 1990s, the era of the so-called “carnal relations” with the United States, President Carlos Menem and his chancellor Guido Di Tella maintained a pragmatic approach to China. Menem traveled to China three times and managed to balance that relationship appropriately. Menem’s time in office was a different context, of course – China was not as economically relevant globally and was also not in conflict with the United States.

During the Mauricio Macri era (2015-2019), the relationship also had a very tense initial stage, but pragmatism ended up prevailing. Argentina-China relations not only became normal but also flourished economically. It does not seem like that history will repeat itself now.

Alberto Fernández left Milei a very heavy inheritance in every sense, including in relation to China. Fernández increased Argentina’s indebtedness to China via a currency swap, failed to fulfill promises regarding strategic projects of China’s interest that ultimately did not materialize, defaulted on key projects, such as the Santa Cruz dams, and brought the bilateral trade deficit to a historic record of $9.5 billion – a very bad balance for both parties. Amid the mounting issues, China could barely celebrate Argentina’s entry into the Belt and Road Initiative in early 2022.

It was clear that Milei was the worst possible scenario for China, and the nightmare became a reality in the worst way. China surely did not imagine that Milei could provoke on such sensitive issues for the Chinese Communist Party like Taiwan, nor that he would align himself in such a radical way with the United States.

In concrete terms, China will have to assume that under Milei there will be no military equipment sales to Argentina, nor will there be progress with other sensitive issues on the strategic agenda, such as the Atucha III nuclear power plant, the logistics hub in Tierra del Fuego, or the participation of Chinese companies in the operation of the Argentine section of the Paraná-Paraguay waterway.

China’s biggest fear now is the possibility that Milei will decide to advance, with strong encouragement from the United States, a review of issues such as China’s aerospace station in Neuquén, or even Argentina’s participation in the Belt and Road Initiative. Even absent a formal withdrawal, the future of large infrastructure projects with Chinese financing is already extremely uncertain. All such projects are currently paralyzed, causing massive layoffs in several provinces.

China’s Possible Response to Milei

Reprisals against Argentina by China would be imminent. One must pay close attention to some clear movements of Chinese diplomacy in recent months. Beijing approved 40 new Brazilian meatpacking plants in record time during February, which are already authorized to export beef to China. Beef is currently Argentina’s second most important export product to China, and 80 percent of Argentina’s beef exports are destined for China. Brazil doubled its beef exports to China in the last five years and could easily replace Argentine supplies in a short time, perhaps with some help from Uruguay and the United States.

It must be taken into account that the strong alignment between Brazil and China is not only because of Milei, but above all due to the global geopolitics that today brings both countries closer than ever. In that context, no matter how much Milei dreams of alternatives, Argentina needs much more from Brazil and China than those countries need from Argentina – that is more than clear. As markets and sources of investment, both Brazil and China are irreplaceable.

The other tool with which China can easily retaliate against Argentina is the currency swap, currently worth around $18.5 billion. Milei will be obliged to renegotiate a portion of the swap before June. The most urgent would be a total of $1.66 billion, which Sergio Massa used during his presidential campaign. Milei will have to negotiate this, and China could take a hardline position: “Without investments, there is no more swap.”

Finally, China is concerned about the recent inclusion of critical minerals, especially lithium, in the U.S. security agenda for the region. China considers this unacceptable, and the Milei government has already shown favorable signs toward this new U.S. agenda.

The United States clearly is not in a position to – nor does it want to – replace Argentina’s economic link with China. But Washington does have an interest in exploiting Milei’s overacted alignment to deploy its anti-China agenda in a country of high geostrategic relevance in the hemisphere. 

In conclusion, the relationship between Argentina and China is at its worst historical moment, with a clear perspective of further deterioration. But if Milei insists on this confrontational line, the negative consequences as part of China’s expected response will be inevitable and very difficult to handle, given the enormous relevance and breadth of aspects involved in the relationship with China – and also due to the great political, economic, and social vulnerability of Argentina.

The article was first published in Spanish by ReporteAsia. Read the original piece here.