BUENOS AIRES/BEIJING, Dec 7 - Argentina's President-elect Javier Milei finds himself in a challenging predicament as he prepares to assume office in the midst of a looming recession and dwindling foreign currency reserves. Despite his earlier fiery campaign rhetoric against China, Milei now recognizes the importance of maintaining a strong relationship with Argentina's second-largest trade partner. China plays a pivotal role in Argentina's agricultural exports and investment in lithium, while also extending essential financial assistance.

Milei's transition team has adopted a more diplomatic stance since his election victory on November 19, acknowledging the complexity of ties with China. The Asian country is the leading buyer of Argentine soybeans and beef, vital commodities for Argentina's agricultural sector. Furthermore, China has provided Argentina with an $18 billion currency swap, a lifeline that has helped the country avoid default.

Incoming foreign minister Diana Mondino assured that while the new government plans to review undisclosed state-to-state agreements, Argentina remains committed to maintaining its ties with China. Mondino emphasized the importance of strengthening private trade, expressing the desire to bolster export volumes and address trade deficits, including the approximately $10 billion deficit with China from last year.

However, concerns have been raised about the fate of ongoing infrastructure projects financed by China in Argentina. Patricio Giusto, director of the Sino-Argentina observatory, highlighted delays and difficulties faced by some projects, citing poor management, regulatory hurdles, and domestic economic challenges. There are fears that strained diplomatic relations could exacerbate these issues, potentially leading to suspended loans and financial hardships for Argentina.

One major project affected by the change in government could be the $5 billion hydropower dam project in the southern province of Santa Cruz. Outgoing regional governor Alicia Kirchner expressed apprehension that Milei's criticisms of China during the campaign could jeopardize the project. Construction for the dam, which involves the arrival of Chinese-made turbines early next year, is less than half complete. Chinese investors are expected to approach the situation pragmatically, seeking a review rather than confrontation.

China's significance in Argentina's economy is hard to overstate. The Asian nation purchases over 93% of Argentina's soy exports, and it accounts for approximately 10% of Argentine exports overall. Moreover, China's presence is felt in the country's lithium sector, with companies such as Gangfeng Lithium, Tsingshan Holding Group, and Zijin Mining holding significant investments. Argentina is the fourth-largest producer of lithium globally, a highly sought-after resource for electric vehicle batteries.

As President-elect Milei prepares to take office, experts predict a pragmatism in Argentina's relationship with China. While Milei may seek to downgrade the political ties, it is anticipated that he will view China as an essential economic partner. The $18 billion currency swap, as well as ongoing negotiations with the International Monetary Fund, will likely remain key considerations for Milei's administration.

As Argentina faces economic challenges, President-elect Milei must walk a delicate tightrope with China. Balancing the country's need for investment, trade, and financial support while addressing concerns about transparency and domestic interests will be a formidable task for his government. Only time will tell how the new administration manages this China conundrum amidst a worsening recession.