Now Argentina Moves To Russia After Sealing China BRI Agreement

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By Chris Devonshire-Ellis   

South America becoming increasingly receptive to Russian trade and economic viability

The Argentinian President Alberto Fernandez has been in Beijing for the opening ceremony of the Winter Olympics and signed off an agreement with China to join the Belt and Road Initiative. Argentina has been enduring economic problems with loans to the IMF secured by multiple American investors who have been unwilling to provide economic concessions. The China deal will open up access to Asian funding instead, with Fernandez stating that “This strategic decision will allow the national government to sign different agreements that guarantee financing for investments and works for more than US$23.7 billion.”

In addition to the China angle, Fernandez also met with Russian President Vladimir Putin just prior to the Olympics, in Moscow, stating that ”Argentina should be “a door for Russia to enter Latin America in a more decisive way.” He also mentioned that his country sought to lessen its dependence on the IMF and the United States.

China has been making increasing strides into South America, with Argentina, Bolivia, Chile, Ecuador, Guyana,  Peru, Uruguay and Venezuela all members of the Belt and Road Initiative. Brazil, the region’s largest economy is not – but it has signed an agreement to align its national development plan with China’s – a significant step. In Central America to the north, Costa Rica, El Salvador, and Panama have all joined, as has Cuba.

The regions trade with, and investment from China has been growing, with 24% of all Latin American products now exported to Asia, up from 18% in 2017. China has also stated that it expects to invest about US$250 billion in South America over the next decade.

Russia’s ties to Central and South America have lesser depth than China’s, but it too has been developing diplomatic and trade relations. It has strong connections with Cuba and Venezuela and has been eyeing South America for trade and development relations through the Eurasian Economic Union (EAEU) to widen the Russian trade sphere in the wake of existing and threatened trade sanctions. To that end, discussions have been held concerning EAEU free trade negotiation with Chile and Ecuador, and it is possible that a future deal could be signed with the entire Mercosur trade bloc of which Argentina is an influential member. Brazil meanwhile is a member of the BRICS grouping, and with China and Russia, a 20% shareholder in the BRICS multilateral New Development Bank and has been considering issuing bonds in Rubles.

There are other incentives to increase Russia-South American trade. Generally speaking, South American currencies are kept low by constant pressure upon them by the US dollar – meaning the US can access South American goods and investments at cheap exchange rates. Some Latin American economies, such as Nicaragua and Venezuela, are like Russia, heavily sanctioned. These two combinations provide easy access for the United States to invest in and purchase regional products, while dissuading trade and investment in the opposite direction – the US dollar is too expensive for many South American economies to readily access. Russia however also has the exact same problem – the Ruble is undervalued by about 72%. What this does however is make the Russian, and EAEU markets (Armenia, Belarus, Kazakhstan, and Kyrgyzstan) far more attractive and more reasonable for South American traders and investors. The EAEU has a market of about 187 million and fits into the trade space between China and the European Union.

With the United States continuing its policy of subduing the purchasing value of South America, and inflicting pain upon what ought to be friendly near-neighboring economies such as Argentina, what is happening is a gradual desertion of the US ideal towards China and Russia instead.

We can expect to hear more in the coming months as a result of increasing trade and investment ties between the South American region, China – and Russia.  

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