More often than not in global politics it’s what is discussed, not what is agreed, that can have the greatest ramifications for the world order.
As part of efforts to turn around its deficit-plagued economy and to stem the current economic turbulence, Argentina agreed a $50billion financial package with the IMF last month. In a sign of good will the deal is much larger and was negotiated more quickly than expected.
The deal is polarizing, welcomed by President Mauricio Macri and lamented by opponents who still have the 2001/02 economic crash front of mind, viewing it as a result of over-reliance on the IMF.
The favourable nature of the IMF loan is in part a reprieve given to Argentina on the back of fiscal pain endured through historical loans. But more so, it is in response to an emerging threat faced from a secondary financial hegemon – China – who continues to challenge the monopoly of Western-backed institutions through its ability to offer an alternative to the traditional structures of global power.
Latin America, and Argentina in particular, has habitually been intertwined with the United States and the default position of the region is an over-reliance on the Bretton Woods institutions for financial reprieve.
However, despite signing an agreement with the IMF at the eleventh hour, Argentina also turned on the charm offensive with the Chinese Government, to secure a support package that builds on an existing currency arrangement between Argentina’s Central Bank and the People’s Bank of China established in 2015.
China’s growing role on the world stage is of course not a new phenomenon. Across Africa, it has invested and loaned billions to relieve debt and develop infrastructure across, and even provided the funds to build the new Africa Union headquarters in Adis Ababa, all of which has come at the expense of the US and Northern Europe’s waning influence on the continent.
Yet, what makes the new and improved Argentina-China fiscal negotiations relevant is that it questions the way we look at the current trajectory of Chinese influence and global affairs.
Crucially, last month’s discussions are demonstrable of a country, who traditionally is dependent and interwoven with the fabric of largely Western financial institutions, but now has the ability to move progressively toward diplomatic and financial channels that directly oppose the West.
Given time, the provisional finance deals put in place by China, which have much better benefits attached to the conditions, are now being greatly extended, paving the way for the country to become the new default provider of financial support sooner than first thought.
The IMF loan may suggest the status quo, but the concurrent discussions with China takes President Xi Jinping’s influence on the global stage to the next level; emerging fiscal leverage in Latin American – America’s back garden.
Matthew Lowe, Corporate and International Affairs
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August 1, 2019