Argentina eyes tapping China swap to cover 2027 financing needs

Argentina is considering utilizing its currency swap line with China to address potential financing needs in 2027, should it be unable to refinance its dollar-denominated bonds under local law. Economy Minister Luis Caputo revealed this possibility during a meeting with investors at a JPMorgan Chase & Co event in Bangkok, ahead of President Javier Milei's re-election bid in the following year.

The minister explained that the investors inquired about a financial program for 2027, in case the Bonares bond refinancing fails. In July, Milei's administration announced plans to issue US$5 billion in 2027 Bonares bonds as part of a US$25-billion financing package. However, the government has paused Bonares issuance amid rising US Treasury yields since mid-August.

At the time, the bonds were providing the Milei government with essential hard currency, as international capital markets remain inaccessible due to Milei's avoidance of them. Argentina's sovereign risk has risen to 600 basis points, up from a low of 410 in early July, and the chances of returning to international capital markets in the near term have diminished.

While the US$20-billion swap line with the United States remains an option, Caputo did not highlight it as a specific tool to address the potential Bonares bond financing gap. Argentina's central bank renewed its US$19-billion swap line with China's central bank in August, including a portion of the swap line equivalent to the expected Bonares bond issuance.

Caputo met separately with IMF Managing Director Kristalina Georgieva and World Bank President Ajay Banga, both of whom applauded Argentina's economic policies. The World Bank is examining the possibility of expanding funds for the country, and Caputo mentioned resolving outstanding claims related to warrants linked to Argentina's GDP as a future government objective.