Argentina's hard-fought and ideologically charged election runoff on November 19 will feature a contest between Sergio Massa, minister of the economy, who won the first round with 36.7 percent of the vote, and far-right candidate Javier Milei, who trailed with 30 percent of the vote. Much can happen to affect the runoff's outcome, but one less acknowledged wild card factor is clear. The role of China will continue to hang over the vote and Argentina's economic future no matter who wins.
China's importance became obvious only a few days before the first round of the elections on October 18, when China activated a $6.5 billion swap line with Argentina, bolstering the country's dwindling reserves. Argentina, always one of the most unstable economies in Latin America, faces yet another major financial crisis with mounting balance of payments problems, the prospect of yet another sovereign debt default, and escalating hyperinflation—prices are increasing at more than 140 percent annually. Chinese assistance was no coincidence. It bolstered the fortunes of Massa at a time when Milei, a self-proclaimed libertarian with some extremist views, has systematically insisted that, if elected, he will cut Argentina's ties with China. His threat has not gone unnoticed among China's business leaders and authorities.
Following Beijing's swap line, the Milei campaign accused China of meddling in Argentina's elections. But since then, the campaign has modulated its aggressive tone. Milei's performance in the first round of voting fell short of predictions of many polls and analysts that he would score an unequivocal victory over Massa in October. It is difficult to pinpoint exactly what went wrong for Milei, not least because Argentina's economic woes are partly Massa's and President Alberto Fernandez's responsibility. But Milei's hardline stance on China and Brazil—he has called Brazil's president Luiz Inácio Lula da Silva a "communist" and pledged to cut ties with Brazil, which is Argentina's largest trading partner—and his insistence on lifting prohibitions on the sale of firearms and human organs, ending public education, and other issues appear to have frightened the electorate.
In the last several weeks, sensing that he might be losing ground, Milei secured the support of right-wing centrist presidential candidate Patricia Bullrich and former president Mauricio Macri. In exchange for their backing, Milei reversed course. He promised to maintain relations with China and Brazil, preserve public education, and keep the prohibitions on firearm and human organ sales. He has also toned down the anti-China rhetoric both directly as well as via his main campaign advisors. Recently elected congress member Diana Mondino, Milei's foreign policy advisor, recognized China's critical economic ties with Argentina and insisted that they will be preserved and possibly expanded. Her words may reflect short-term campaign needs only and not a complete turnaround in the candidate's position, however.
While Milei attempts to strike a different tone on China, Massa has continuously played up the country's relevance to Argentina. In addition, Massa has consistently attacked Milei's plans to dollarize the economy, that is, to abandon the country's own currency (the peso) and unilaterally adopt the dollar. Massa says Milei's scheme would inflict harm not least because Argentina does not have enough dollars to sustain the economy at its current GDP level , an undisputed fact amongst economists. But Massa also asserts that dollarization would likely damage relations with China. While the Chinese have remained silent on Argentina's potential dollarization, China's plans to promote its own currency in international trade would likely conflict with such a plan.
Under the Belt and Road Initiative alone, China has lent Argentina just under $120 billion. The amount is the highest it has given to the 22 countries contemplated in the initiative. If China were to help Argentina navigate its current crisis with additional funds, it would enable the South American country to postpone a painful International Monetary Fund (IMF) bailout that would come with stringent austerity conditions attached.
If Massa wins, the Chinese may be willing to extend further financial assistance to the new government for several reasons, notably to decrease Argentina's reliance on the IMF. Argentina's troubled history with the international organization is extremely contentious among the electorate—it has had 21 IMF programs to address crises, all of which contained harsh austerity measures. The measures and their effects on the population explain why most Argentineans would prefer no further involvement with the Fund. But if Milei wins, China is unlikely to come to Argentina's aid, particularly at first, forcing the country into another inevitable round of negotiations with the IMF.
China is, therefore, not only the third wheel in the election runoff approaching in November 19. It is also a major actor that has gone unacknowledged in an ongoing drama that will define not only Argentina's political fate but also that of the entire region. Brazil, Chile, and other countries have taken an unprecedented interest in their neighbor's politics. Argentina's neighbors mostly favor Massa both because they need to restrain far-right extremism within their own borders and because Milei's foreign policy would likely damage bilateral relations. Critically, all of these countries are highly dependent on China.
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