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Argentina’s Nuclear Power Project with China Raises Concerns

CHI Atucha III Nuclear Power Plant

The Atucha Nuclear Complex in Lima, Zárate district, Buenos Aires province, Argentina, where the Atucha III power plant is planned to be built. (Photo: Mrcukilo/Creative Commons/Wikimedia Commons)

The project for the construction of Atucha III, Argentina’s fourth nuclear power plant, which seeks financing from China, is raising concerns due to the Asian country’s growing influence. According to experts, the proposal to finance the plant with Chinese capital could leave Argentina in a vulnerable economic situation.

“China operates with the logic of a loan shark: It lends to those who are drowning in debt, that is, to those who know beforehand that they won’t be able to pay,” Juan Belikow, professor of International Relations at the University of Buenos Aires, told Diálogo. “To complicate things even more, China usually offers to finance grandiose works — much larger than what is necessary for the short and medium term — that are economically unsustainable and commercially unviable. Therefore, the probability that repayment will be impossible increases.”

According to the expert, China sustains its trade surplus by offering loans or infrastructure financing to countries with debt. “It does so because that way it keeps critical infrastructure that is of extreme interest: the supply chain for [its expansionist mission of] the New Silk Road [Belt and Road] and everything related to energy.”

As such, the financing of Atucha III could mean a security risk for Argentina and the region. “If we put China’s investments in context — the loss of Argentine sovereign control over its critical infrastructure, in general, and those that are dual-use, in particular — such bogus investments and financing are definitely a major tangible and palpable threat to the country’s national security,” Belikow said.

Chinese debt trap

The agreement for the construction of Atucha III was signed in February 2022, before Argentine President Alberto Fernández’s trip to China. The agreement between Nucleoeléctrica Argentina and the China National Nuclear Corporation provided for the construction of a 1,200 MWe reactor at the Atucha Nuclear Complex in Lima, Buenos Aires province, according to Argentine newspaper El Cronista. The $8.3 billion investment would be “most of it of Chinese origin,” the Argentine government said in a February 1, 2022 statement.

But in April, amid domestic economic pressures, Argentina asked China to fully finance the construction of the plant, U.S. magazine The Diplomat reported. Today, as China and Argentina try to reach an agreement on financing, concerns are being raised about Argentina’s ability to repay the debt, as is happening with other developing countries.

“China has become a key player for many countries in Asia, Africa, and Latin America. As part of its New Silk Road [Belt and Road] initiative, Beijing has offered million-dollar loans to finance infrastructure,” Deutsche Welle en Español reported. “The problem is that many countries cannot repay the debt. Some talk about the Chinese debt trap. What is it? Very simple: China encourages poor countries to take on debt up to the ceiling. And if they can’t pay back the loans, Beijing charges them in assets and raw materials, making them totally dependent on the Asian giant,” Deutsche Welle en Español added.

High interest rates

To understand the Chinese debt trap, the global financial context must be taken into account. Since the end of World War II, countries in difficulty have turned to the International Monetary Fund (IMF) for financial assistance. The IMF has made loans conditional on structural reforms and fiscal and monetary commitments.

In recent years, China has emerged as a new heavyweight in providing emergency loans to indebted countries. More than 20 debtor countries have received $240 billion in Chinese bailout loans since 2000, according to data from AidData, a research institute at the University of William and Mary in the United States.

“The scale of China’s global bailout lending program is also growing rapidly. In the last five years alone [2016-2021], more than $185 billion was extended,” AidData indicated in a recent study. China provides the billion-dollar loans with few requirements, but at higher rates than the IMF.

“China charges fairly high interest rates for emergency loans to struggling middle-income countries, typically 5 percent. That compares with 2 percent for IMF loans,” The New York Times reported. “Payments due on many of these loans have doubled in the past year, putting many nations in a difficult financial situation.”

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