Argentina is facing a severe shortage of US dollars, prompting the country to take measures to alleviate the problem. One solution that has been implemented is allowing commercial banks to open deposit accounts in the Chinese yuan. The Central Bank of Argentina announced this decision on Thursday, stating that the yuan can now be used as a form of currency in savings and checking accounts.
This move comes as the country’s securities regulator also announced that Argentina can issue securities in the Chinese currency. These measures are aimed at diversifying Argentina’s currency options and mitigating the impact of the dollar shortage.
The shortage of US dollars in Argentina has been a result of various factors. The Argentine peso has fallen nearly 80% against the greenback since the beginning of 2020. This depreciation of the local currency has made it more expensive for the country to acquire dollars.
Furthermore, Argentina has experienced a drought that has significantly impacted its agriculture exports. As a result, the country has sold fewer crops, which are typically denominated in US dollars. This has further contributed to the shortage of dollars and increased the difficulty of conducting international trade.
To address these challenges, Argentina has started to explore alternative currencies such as the yuan. In April, the country began paying for imports from China in the Chinese currency. More recently, Argentina partially made a $2.7 billion payment to the International Monetary Fund using the yuan.
The use of the yuan as an alternative currency aligns with China’s efforts to internationalize its currency. China has been increasing the global circulation of the yuan, using it for a significant portion of its oil imports from Russia.
In Argentina, the volume of yuan transactions in the country’s currency market has been growing. In the first 10 days of June alone, yuan transactions reached approximately $285 million, double the volume recorded for the entire month of May. Over 500 companies in Argentina are considering paying for imports in the Chinese currency.
Despite the increasing usage of the yuan, some Argentinian politicians remain resistant to moving away from the dollar. Javier Milei, a leading presidential candidate, has proposed replacing the peso with the greenback as Argentina’s local currency to combat inflation. Milei argues that the peso’s value is rapidly deteriorating and that adopting the US dollar would provide stability.
The implementation of measures to address the dollar shortage is seen as a necessary step for Argentina. By diversifying its currency options and exploring alternatives such as the yuan, Argentina aims to mitigate the impact of the shortage and facilitate international trade. The use of the yuan also aligns with China’s goal of increasing the global circulation of its currency. However, the effectiveness of these measures and their long-term implications remain to be seen.