Argentina Turns to Yuan to Save Dwindling Dollars

Welcome back to World Brief, where Argentina adopts the yuan in trade deals with China, South Korea pursues greater U.S. extended deterrence, and Colombia’s president reshuffles his cabinet.

Argentina will officially start paying for Chinese imports in yuan rather than dollars, Argentine Economy Minister Sergio Massa announced on Wednesday. Argentine authorities hope the currency deal will help ease the country’s diminishing dollar reserves. Building up its foreign currency reserves was a key pledge that Argentina’s government made as part of a $44.5 billion debt relief deal with the International Monetary Fund—and doing so is seen as critical to the stability of the country’s financial system.

For decades, Buenos Aires has battled high inflation and poverty, which were both exacerbated by the COVID-19 pandemic and a sharp drop in agricultural exports caused by a historic drought. Now, Argentina’s financial crisis is only getting worse. The country has one of the world’s highest inflation rates: It is currently more than 100 percent for the first time in three decades. Many banks are even having to build new vaults to hold all of the country’s currency deposits.

Argentine President Alberto Fernández has followed a Peronist economic strategy to fight inflation, one that “prioritizes popular economic welfare in the short term at the cost of long-term economic development,” FP’s Anusha Rathi explained. But any relief Peronism offers is short-lived.

On Tuesday, Fernández accused the country’s right-wing opposition party of fueling erosion of the peso against the dollar. Massa has since ordered an investigation into alleged wrongdoing and money laundering. He is the third finance minister to hold the key post since July 2022. Argentina will hold general elections in October, and combatting inflation is expected to be a top issue for voters.

Argentina is not the first Latin American country to switch to the yuan. Brazil recently signed an agreement with China to trade in yuan and reals instead of dollars. China is Brazil’s largest—and Argentina’s second-largest—trading partner. Both countries hope trading in yuan will decrease their dependency on the U.S. dollar as Chinese investment in the region grows; Beijing, meanwhile, hopes the moves will provide further momentum in its efforts to globalize the yuan.

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Ironclad assurances. As South Korean President Yoon Suk-yeol’s trip to Washington draws to a close, South Korean and U.S. officials are celebrating new and renewed commitments to the two countries’ mutual defense relationship. Yoon and U.S. President Joe Biden agreed to greater South Korean influence over U.S. extended deterrence decisions in an effort to thwart North Korean aggression on the Korean Peninsula. Called the Washington Declaration, officials on both sides hope the agreement—and the trip—cemented the countries’ diplomatic relationship and helped avert a crisis of confidence.

Although Seoul does not have nuclear weapons, South Korean politicians and the public have expressed interest in developing them. In January, Yoon suggested that South Korea may want to acquire its own nuclear weapons if North Korea’s military threats worsen. He later walked back his comments, but the damage was done. “[S]cattered calls for nuclear proliferation have posed a serious risk to the alliance,” nuclear policy experts Adam Mount and Toby Dalton argue in Foreign Policy. “They force U.S. officials to turn their attention away from deterrence to nonproliferation while distracting from the more important problems posed by North Korea and China.”

Cabinet reshuffle stress. Colombian President Gustavo Petro called for a complete cabinet reshuffle on Tuesday after a health reform debate was abandoned in Colombia’s Congress because a quorum was not reached. In Petro’s eyes, that signaled it was time to make immediate, drastic changes—despite having only been in office for less than nine months. “Such a situation leads us to a rethinking of the government,” Petro tweeted. The sudden reshuffle sparked a fall in the peso and risked a stock market crash.

Market anxiety highlighted public desire to keep Finance Minister José Antonio Ocampo in the job. He had widespread support after guiding Petro’s ambitious tax reform policy into law last year. However, on Wednesday, economist Ricardo Bonilla accepted the role. Colombia’s health minister and interior minister have also already been replaced, now held by Guillermo Alfonso Jaramillo and Luis Fernando Velasco, respectively.

Gender reform in Rome. Who said old institutions can’t learn new tricks? Pope Francis announced on Wednesday that women will be allowed to vote in October’s global bishops meeting, known as a synod, for the first time in history. In the past, women could only observe the papal advisory body’s proceedings. Most of the votes, however, will still be cast by men. The pope also expanded voting rights to 70 handpicked nonclerical members instead of relying solely on the church’s elite to conduct the meeting. “It’s an important change. It’s not a revolution,” said Cardinal Jean-Claude Hollerich.

K-pop group BTS may have some new competition. After a long day of intense nuclear deterrence strategy sessions, South Korea’s Yoon surprised and delighted everyone at the official White House state dinner on Wednesday night by singing the opening lines to “American Pie” by Don McLean. “I had no damn idea you could sing,” Biden told him. Well, Mr. President, neither did we. Take a listen.