Chinese Project To Expand Argentine Nuclear Footprint

Despite economic downturns, Argentina and China finalized a historic nuclear power deal for Latin America on Nov. 17. Against the backdrop of the G20 meeting in Turkey, the two governments signed a deal for China to begin construction on two new nuclear plants in Argentina worth a combined $15 billion. With the deal settled, China is moving forward with an ambitious plan to position itself as a leader in nuclear technology. Promising easy financing and affordable equipment to prospective partners, China hopes to use the Argentine project as a showground for its newly developed Hualong-1 reactor.

China will be using this technology to build the second of its two Argentine plants. The first will use the “Cadnu” design, or Canadian Deuterium Uranium, a method popular outside the United States and Europe.

Expectations of the deal have already helped China move into the European market. Last month, China assumed one-third ownership of a French-led project to construct a series of new nuclear power plants in the United Kingdom and is now allocating $7.6 billion toward a nuclear energy deal with Romania.

Recently celebrating the completion of its third plant, Atucha 2, Argentina’s appetite for nuclear power is growing. Between its three existing plants alone, World Nuclear News reports that Argentina is set to expand nuclear power’s share of its energy production to 10 percent.

The country’s abysmal credit rating has stymided attempts to further increase that percentage, killing any attempt at raising capital. Standard & Poor’s rates Argentina’s credit at 20 out of 100. For perspective, Nigeria, which is currently plagued by corruption, low oil prices, and a brutal war against Boko Haram, holds a credit rating of 20.

The low credit rating is only part of Argentina’s economic woes. The country is currently dealing with a 15 percent inflation rate, an estimate disputed my some experts such as Tim Umberger, an advisor at East Capital who places the actual inflation rate at 30 percent. This difficulty is compounded by the dwindling foreign currency reserves in Argentine banks. Forbes notes the combination of these factors has scared off prospective foreign investors, leaving few funding options open.

One of those options is China, whose willingness to invest billions of dollars in Argentina has not faltered even in the face of its own economic slowdown. Its deal with Argentina comes on the back of strengthening economic ties between the two countries. Since 2007, the Financial Times has traced $19 billion in Argentine infrastructure development to Chinese investment. In 2014, China even participated in an $11 billion currency swap.

Sino-Argentine ties have also pushed into the soy business where Argentina has found an eager market in China. By comparison, data published by the government on foreign assistance show the United States has invested just over $11 million, one thousand times less, in the same period. Consequently, China is acquiring a remarkable foothold in Latin America, a region historically seen as the United States’s backyard.

However, with Mauricio Macri’s presidential victory on Nov. 22, the feasibility of the Sino-Argentine deal could change. A member of the center-right, Mr. Macri has signaled plans to shift Argentine foreign policy away from leftist regimes in Latin America and toward more open relations with the United States and Europe. This shift will also include reducing ties established under Cristina Kirchner with China, Russia, and Iran.

With final veto power over the nuclear plant agreement, Mr. Macri walks a tenuous line. Pushing the deal forward would strengthen his country’s energy program at the expense of deepening Argentina’s reliance on China and alienating the United States. However, undoing the deal would mean siding with Washington, whose purse strings are neither as loose nor as generous as Beijing’s. Economic woes dominating the domestic agenda may prove crucial to charting the country’s future, pushing Mr. Macri to act on precedent and pragmatism rather than on hopes of rekindling a relationship with no cash value.