China, vying with U.S. in Latin America,
eyes Argentina nuclear deal
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[November 28, 2018]
By Cassandra Garrison and Matt Spetalnick
BUENOS AIRES/WASHINGTON (Reuters) -
Argentina and China are aiming to close a deal within days for the
construction of the South American nation's fourth nuclear power plant,
a multi-billion dollar project that would cement Beijing's deepening
influence in a key regional U.S. ally.
Argentina hopes to announce an agreement on the Chinese-financed
construction of the Atucha III nuclear power plant during Chinese
President Xi Jinping's state visit on Sunday following the summit of
leaders of G20 industrialized nations in Buenos Aires, Juan Pablo
Tripodi, head of Argentina's national investment agency, told Reuters in
an interview.
The potential deal, reportedly worth up to $8 billion, is emblematic of
China's strengthening of economic, diplomatic and cultural ties with
Argentina. It is part of a wider push by Beijing into Latin America that
has alarmed the United States, which views the region as its backyard
and is suspicious of China's motives.
The focus of this week's meeting between U.S. President Donald Trump and
his Chinese counterpart Xi Jinping on the sidelines of G20 will be on
their two countries' trade war, but the backdrop will be the competition
between the powers for influence in Latin America.
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When Argentina negotiated a $56.3 billion financing deal with the
International Monetary Fund (IMF) to rescue its troubled economy earlier
this year, Trump voiced his support for the plan and President Mauricio
Macri's leadership.
But it is China that has emerged as Argentina's critical trading
partner, investor and financier, a Reuters review of trade and
investment data shows, with Beijing pumping billions into Argentina's
economy and positioning itself as a reliable lender for its
crisis-stricken economy.
China and Argentina are expected to seal a currency swap deal this
weekend that doubles the original amount of the credit line to $18.7
billion. The deal will make China the biggest non-institutional lender
to Argentina.
China is the main importer of Argentine soybeans, the South American
country's biggest cash crop. In the last 10 years, it has also emerged
as a major financier of Argentine projects, mainly infrastructure, worth
a total of about $18 billion, offering low interest rates of between 3
and 4 percent, according to a Reuters review of Chinese state funding
data compiled by the Inter-American Dialogue, a Washington-based
non-profit think-tank.
The negotiations on Chinese financing of the Atucha III nuclear power
plant are a key cause for concern for the U.S. government, a senior
Trump administration official told Reuters.
Atucha III would be one of the biggest projects financed by China in
Argentina, according to the Reuters review of Chinese state funding
data.
Argentina's national newspaper Clarin reported at the weekend that if
the deal was signed, China would loan Argentina $6.5 billion to be
repaid in 20 years, with eight years of grace and a 4.5 percent annual
interest. Reuters was not able to independently confirm these details.
“These are infrastructure projects where China is coming in and
providing very low interest loans or they are just having Chinese
companies do it," the U.S. official said. "It’s creating an economic and
political dependency on China that’s incredibly dangerous.”
The message to Macri and other regional leaders is increasingly that
“your sovereignty can be lost by being so ensnared in debt, you can lose
your sovereignty to the person who holds your debt,” the U.S. official
said.
China's foreign ministry strongly disputes that view.
"China’s investment and financing in Latin America are in line with
market rules and common international rules and practices, and do not
have any political conditions attached," the ministry said in a
statement to Reuters.
The involvement of Chinese companies in water, power and road projects
has helped to drive Argentine economic and social development, it said.
Defending Argentina's relationship with China, an Argentine government
official told Reuters that Beijing was an important investor and would
only become more important in the future.
However, the official acknowledged the U.S. concerns were not without
merit.
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![](../images/112818pics/news_u41.jpg)
A man sits in front of a building with The Industrial and Commercial
Bank of China Ltd (ICBC) logo in Buenos Aires, Argentina November
26, 2018. Picture taken November 26, 2018. REUTERS/Marcos Brindicci
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"Overall, I would say it's a fair warning and it's something
countries should take into consideration. I think Argentina takes it
into consideration very seriously," the official said.
RECALIBRATING TIES
China's attraction to Argentina can be attributed to three factors:
natural resources, weak institutions, and the country's lack of
other financing options, according to Juan Uriburu, an Argentine
lawyer who has worked on two major Argentina-China joint ventures.
"China can afford to have these competitive (interest) rates. In the
meantime, what they create are new markets for Chinese companies
abroad, which back home means Chinese companies will be working,
making the products, making the locomotives, the cars, the rails,
everything," Uriburu said.
Tripodi, the Argentine investment agency head, credited Macri's more
business-friendly policies for the uptick in Chinese investment.
Interest from Chinese companies was growing "in an exponential way,"
he said.
As a presidential candidate, Macri pledged to recalibrate
Argentina's relationship with China. Under his predecessor, Cristina
Fernandez, Argentina had changed the law to enable Chinese companies
to skip the bidding process if they were financing projects,
according to Margaret Myers, director of the China and Latin
American program at Inter-American Dialogue.
When Macri took office in late 2015, he vowed to review deals the
Fernandez government had made with China. Atucha III, a railway
project and two hydropower dams in Santa Cruz province, which her
late husband had governed, were among projects thrown into limbo.
Cross-cancellation clauses, however, have made it difficult for
Macri to terminate the largest projects, said Uriburu. Macri has
instead renegotiated some terms, including bringing down the loan
amount for the hydro dams from $4.7 billion to $4 billion.
In Brazil, Latin America's biggest economy, right-wing
President-elect Jair Bolsonaro also took a tough stance against
China on the campaign trail, portraying it as a predator seeking to
dominate key business sectors. But since winning election Bolsonaro
has softened his position, saying China is welcome to invest in
Brazil and that trade between the two countries could grow.
HEARTS AND MINDS
China's influence in Argentina extends beyond the numbers. For
example, it has established Confucius institutes, cultural
organizations, at Argentina's largest university, the University of
Buenos Aires, and a second college in Buenos Aires province.
Some U.S. lawmakers have warned that the institutes, which number
more than 100 around the world, are an attempt by China to further
its political influence, which Beijing denies.
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In one of the most visible examples of Chinese soft power in
Argentina, the government held a nationally televised event with the
Chinese ambassador earlier this month to showcase armored vehicles
and other security equipment that China has donated to help secure
the G20 event.
Argentine security officials told Reuters they would hold a separate
event to highlight U.S. aid for the summit, which begins on Friday.
That has yet to happen.
(Reporting by Cassandra Garrison and Matt Spetalnick. Additional
reporting by Lusha Zhang in Beijing and Hugh Bronstein in Buenos
Aires; Editing by Daniel Flynn and Ross Colvin)
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