Argentina’s decision to repay a sizable IMF loan in Chinese Yuan rather than US dollars marked a sea change in international monetary policy.
Argentina, as the newest member of the BRICS, has taken an innovative step in the realm of finance by paying off a sizable IMF debt with Chinese Yuan.
Argentina’s Central Bank is leaning on the currency of the Asian superpower, revealing a change in global economic alliances, as the country’s dollar reserves decrease and it is forced to seek other sources of funding.
Argentina’s Central Bank has had to make quick adjustments in response to a tightening dollar supply. Yuan use was made possible when the IMF’s reserve assets, the Special Drawing Rights (SDRs), were used to cover a significant chunk of the country’s $2.6 billion IMF commitment.
The Yuan’s meteoric rise to 28 percent of all foreign currency transactions in Argentina is a resounding indication of a profound shift in South America’s monetary currents.
The tectonic plates of international commerce are changing as the BRICS countries coalesce behind the Yuan, advocating it as a preferred medium for settlements—a painful reflection of de-dollarization initiatives gathering steam.
This is not a one-time tactic. Argentina, which must pay the International Monetary Fund (IMF) $700 million in interest, is considering using the Yuan once again, lending credence to the argument that the US currency is no longer unchallenged.
Multinational corporations with operations in Argentina are switching to the Yuan from the U.S. dollar for their import transactions, adding another player to the monetary drama.
Whirlpool, a global powerhouse, has joined the growing list of companies that have chosen the Yuan over the US currency.
The fact that Argentina is providing the tools for Fortune 500 businesses to trade in Yuan is emblematic of a larger plan aimed at weaning the country off its reliance on the U.S. currency.
The Argentine Central Bank and the People’s Bank of China have signed a huge $6.5 billion currency exchange arrangement to cement their growing economic kinfolk.
As well as increasing Argentina’s currency reserves, this transaction, worth an eye-popping 18 billion Yuan, is a striking example of China’s growing financial power in Latin America.
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