Argentina expands China currency swap as Beijing eyes Latin America

China has used currency deals, financing for infrastructure projects and other investments to expand its influence in Argentina and across Latin America. (File/AP)
Updated 09 November 2018
0

Argentina expands China currency swap as Beijing eyes Latin America

  • The agreement is practically done, minus some formal details to finalize the process: Central Bank President Guido Sandleris
  • Argentina and China first agreed to a currency swap program to boost its dwindling reserves in 2009

Argentina’s central bank said on Thursday it would nearly double its currency swap deal with China, bringing the total to 130 billion yuan ($18.7 billion), as Beijing looks to expand its influence in the recession-struck Latin American country.
Central Bank President Guido Sandleris, who was in China finalizing the agreement, said that the deal for 70 billion yuan would be expanded by 60 billion yuan, according to a bank spokesman.
“The agreement is practically done, minus some formal details to finalize the process,” Sandleris said.
Argentina and China first agreed to a currency swap program to boost its dwindling reserves in 2009 under former President Cristina Fernandez. Last year, under President Mauricio Macri, they agreed to extend the program for three more years.
China has used currency deals, financing for infrastructure projects and other investments to expand its influence in Argentina and across Latin America.
“As the US is looking inward, China is continuing to invest in the region. Between currency swaps and tech investments, China is filling the gap in Latin America,” said Nathan Lustig, managing partner at Magma Partners, a Chilean-based startup investment firm.
The swap agreement comes ahead of the high-profile G20 summit of the world’s major economies to be held in Buenos Aires at the end of November, which Argentina will host.
Argentina’s central bank has approximately $54.25 billion in reserves, after the country firmed up a financing agreement with the International Monetary Fund last month.
Argentina turned to external sources of financing after a bad drought and a run on the peso currency earlier this year sparked investor jitters over whether the country could service its international debts in 2019.
Sandleris assumed the role of central bank president in September after his predecessor unexpectedly resigned amid negotiations to expand the IMF agreement to $56.3 billion, the largest in the fund’s history.
Under Sandleris, the peso has stabilized after the central bank initiated a policy to limit growth in the country’s monetary base. The policy aims to control inflation as the country struggles to pull itself out of recession.
“During the first month of our new monetary policy, we met the goal of zero growth in the monetary base, and we will continue to meet that goal in the coming months,” Sandleris said.
Sandleris added that the impact of the policy on inflation would not be immediate.
Argentina’s inflation in 2018 is forecast at 47.5 percent, according to the latest central bank poll.
The peso has lost almost half of its value against the dollar so far this year.


Crisis at India’s Jet worsens as it grounds planes, faces strike

The debt-laden carrier has delayed payments to banks, suppliers, pilots and lessors. (Reuters)
Updated 52 min 48 sec ago
0

Crisis at India’s Jet worsens as it grounds planes, faces strike

  • More than 20,000 people are employed in the company
  • The company had to stop more than 50% of their aircraft due to insufficient funds

MUMBAI: India's Jet Airways was fighting multiple crises Wednesday after grounding six planes, leaving it with only a third of its fleet flying, while pilots have threatened to walk out and a major shareholder is reportedly looking to offload its huge stake.

The problems at India's number-two carrier come as other airlines struggle to turn a profit despite the sector rapidly expanding in the country over recent years.

Jet, which employs more than 20,000 people, is gasping under debts of more than $1 billion and has now been forced to ground a total of 78 of its 119 aircraft after failing to pay lenders and aircraft lessors.

In a statement late Tuesday announcing its latest grounding, the firm it said it was "actively engaging" with lenders to secure fresh liquidity and wanted to "minimise disruption".

But with hundreds of customers left stranded, Jet's social media accounts have been flooded with often suddenly stranded passengers demanding information, new flight tickets and refunds.

"@jetairways We book our flights in advance so that we save on travel cost and you are sending cancellation (message) now?", read one irate tweet on Wednesday.

"I have sent a DM (direct message) regarding my ticket details. Please respond!", said Sachin Deshpande, according to his Twitter profile a design engineer.

Another, Ankit Maloo, wrote: "Received an email for all together cancellation of flight days before departure without any prior intimation or communication over phone!"

The firm is also facing pressure from its many pilots who have not been paid on time, with unions threatening they will walk off the job if salaries do not arrive soon.

"Pilots will stop flying jet planes from 1st April 2019 if the company does not disburse due salaries and take concrete decisions," a spokesperson for the National Aviator's Guild, a pilots union, told AFP.

India's aviation regulator on Tuesday warned Jet Airways to ensure that staffers facing stress are not forced to operate flights.

Meanwhile, Bloomberg reported that Etihad Airways of the United Arab Emirates has offered to sell its 24 percent stake in Jet to State Bank of India (SBI).

A collapse would deal a blow to Prime Minister Narendra Modi's pragmatic pro-business reputation ahead of elections starting on April 11.

India's passenger numbers have rocketed six-fold over the past decade with its middle-class taking advantage of better connectivity and cheaper flights.

The country's aviation sector is projected to become the world's third-largest by 2025.

But like other carries, Mumbai-based Jet has been badly hit by fluctuating global crude prices, a weak rupee and fierce competition from budget rivals.

Alarm bells for Jet first rang in August when it failed to report its quarterly earnings or pay its staff, including pilots, on time. It then later reported a loss of $85 million.

In February, it secured a $1.19 billion bailout from lenders including SBI to bridge a funding gap, but the crisis has since deepened.

"Jet Airways is rapidly reaching a point of no return and running out of assets to keep itself afloat," Devesh Agarwal, editor of the Bangalore Aviation website, told AFP.

"The only solution is equity expansion by diluting its stakes but Jet is just trying to cut losses and running out of options," Agarwal said.

Shares in Jet Airways were down more than five percent on Wednesday.