China, US clash over major Argentina currency swap line

By Adam Jourdan

BUENOS AIRES (Reuters) - China is on a crash course with the United States over a major Chinese currency swap deal with Argentina that has buffered the South American country's depleted foreign reserve levels even as it seeks a new deal with the Washington-based IMF.

In a talk at Miami Dade College late last week U.S. Special Envoy for Latin America Mauricio Claver-Carone slammed the long-standing $18 billion swap line as amounting to "extortion" by China and said Washington wanted to see it ended.

On Tuesday Chinese foreign ministry spokesman Lin Jian, in a regular press conference, shot back at the United States, alleging that Washington was trying to "drive a wedge" between China and partners in Latin America.

"Fair-minded people are able to tell who is extorting and coercing others and making trouble," he said in response to a question about Claver-Carone's comments.

"Argentina's currency swap with China has for a long time played an important role in stabilizing its economy and finances, which is welcomed and well received in Argentina."

China, the world's No. 2 economy that is facing a major trade war standoff with U.S. President Donald Trump, has a long-term swap agreement with Argentina, a serial defaulter that has been firefighting a sliding currency and dwindling foreign currency reserves for years.

That swap line has come under scrutiny under Trump, an ideological ally of Argentina's libertarian President Javier Milei. Milei faces a tough juggling act, however, between his White House ally and China, which snaps up Argentine soy, beef and lithium.

Argentina and China last year renewed the activated part of the currency swap through July 2026, which helped to defuse fears over a payment crunch. The central bank did say then it would gradually ramp that down to zero by mid-2026.

Claver-Carone, asked about Argentina and its talks with the International Monetary Fund (IMF) over a new $20 billion loan program, said he hoped the talks ended in success, but that Washington was concerned about China's role in the country.

"What we would like to see, eventually, is the end of the famous line of credit Argentina has with China," he said. "That line of credit is extortionate, and as long as they maintain that line of credit, China will always be able to extort."

He did not give details about how the currency swap was extortionate, though the United States has long warned about what it calls Chinese debt diplomacy in Latin America. China says it offers tangible trade and investment to the region.

(Reporting by Adam Jourdan; Editing by Andrea Ricci)