RMB internationalization in LatAm progressing unevenly

MEXICO CITY - As the International Monetary Fund (IMF) announced it would include China's currency, the renminbi, into its special drawing rights (SDR) basket, Latin American countries have praised the decision with expectations.

This was because the region had seen the renminbi's colossal strides, especially this year, though the currency's further and wider acceptance still takes time.

The IMF's decision showed the impact of China's reforms, said IMF Managing Director Christine Lagarde. "The continuation and deepening of these efforts will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy."

On Nov 14, shortly before the IMF announced the decision, Argentine Vice President Amado Boudou had called for speeding up the renminbi's internationalization, and urged the IMF to include the Chinese currency into the SDR basket.

"We must change the global financial order. China and Argentina have always been firm in defending the consumption capacity of their populations," said Boudou.

Boudou's positive tone was no surprise, considering how Argentina has benefited from the Chinese currency.

In July 2014, with a debt default looming large, Argentina obtained a currency swap from Beijing worth $11 billion. With global markets being reluctant to lend, the offer was a shot in the arm for Buenos Aires' foreign reserves.

According to Ramiro Castineira, chief economist at Argentine consultancy firm Econometrica, the swap "saved 2015" for Argentina and "isolated it from international economic reversals."

"Argentina needs financing ... it becomes imperative to sustain the current levels of consumption," said a report of Econometrica.

The fact that the renminbi was the currency of choice for this need testifies to its internationalization. However, the IMF would not have been satisfied if its members viewed the renminbi as a rescue currency only. The currency had to prove itself in a number of everyday financial transactions first.

This process advanced in May when China agreed to grant a quota of 50 billion renminbi ($7.8 billion) to qualified foreign institutional investors in Chile, where the China Construction Bank was also appointed as an renminbi clearing bank, the first of its kind in Latin America.