"Can Argentina’s Belt and Road membership accelerate its energy transition?" 15 March 2022

President Alberto Fernández’s trip to China in February heralded the accession of Argentina to the Belt and Road Initiative (BRI), and confirmed a series of energy investments that could boost its energy transition – but also facilitate fossil fuel development.

Argentina has had limited or no access to international financial markets for years, a situation that is likely to endure, owing to its high level of sovereign debt. The nation did, however, recently agree a debt restructuring deal with its main creditor, the International Monetary Fund. Meanwhile, China’s interest as an investor in Argentina is growing, with the signed memorandum of understanding (MoU) on the BRI specifically mentioning the energy transition. [...]

Sources from the Ministry of Economy told Diálogo Chino that China’s attractiveness as a development partner lies in its financial capacity, but that there are differences between foreign direct investment – in which the private company assumes the risk of the project – and a sovereign loan, in which the risk is transferred to the Argentine state. As such, only part of the foreign currency ends up in the country, while another portion stays in China to buy equipment.

Marcelo Kloster, president of the Argentine state-owned energy company IMPSA, stressed that the incorporation of the nation’s industry into the energy value chain is another, long-standing issue. The government is seeking to support national industries so that they can play a greater role. China is reportedly “more open than before” to the idea, Kloster said.

Ling Peitian, general manager of Goldwind Argentina, said that investing in Argentina carries extra risk compared to other South American countries due to its legal and regulatory volatility, foreign exchange restrictions and limited electricity transmission capacity. Yet, this does not detract from the “very high attractiveness” of the market, Ling told Diálogo Chino.

“There are excellent wind resources, growth potential, and laws and regulations that support the development of clean energy. Furthermore, investments now fall under the BRI, China’s international economic cooperation initiative, which Argentina has joined,” Ling added.