Friday, October 31, 2014

Argentina/China: Seemingly, Any Deal Between Two Parties is Apparently Negotiable

According to The Latin American Tribune, the Central Banks of Argentina and China on Thursday (October 30) activated a bilateral currency-swap agreement, with the South American country submitting a request for an initial tranche of yuan equivalent to $814 million.

The Central Bank of Argentina said in a statement that the People’s Bank of China authorized that first installment in keeping with an agreement signed in July by the two monetary authorities.

“This instrument will help stabilize bilateral trade balances. At the same time, this Central Bank has authorized an equivalent amount in pesos in favor of the People’s Bank of China,” the statement added.

The Central Bank of Argentina said the yuan “is on a path to becoming one of the major global reserve currencies.”

Yuan “can be freely converted into dollars, euros, or any other reserve currency” in Hong Kong, London or Singapore, the monetary authority noted.

COMMENT: Negotiator-guru Herb Cohen once said, “Any deal agreeable by two parties is always negotiable.”

Seemingly, there are no exceptions where foreign currency conversion is concerned as evidenced by the Argentine-Chinese deal that renders virtually everything “negotiable.”

Of course, what is unknown is what Argentina is actually paying for such a sweetheart deal?

As part of the three-year agreement, aimed at boosting the South American country’s dwindling foreign-currency reserves, Argentina’s Central Bank may request additional swaps up to a maximum of $11 billion, “which represent support for the implementation of its financial, exchange-rate and monetary policies.”

In 2009, Argentina and China signed a similar three-year agreement for currency swaps of up to $10.2 billion.

No comments: