Despite the presence of related propaganda disseminated through various government social media channels, the novelty went largely unremarked. Nevertheless, it was a crucial announcement with multiple interpretations – one interpretation is that President Javier Milei’s government is reactivating the most important public works project in the country; another, and perhaps the most significant, is that the decision signifies the normalization of relations between Argentina and China. The news item in question, published on March 5 by Economy Minister Luis ‘Toto’ Caputo on his X social network account, stated: “We have agreed to restart work on the Santa Cruz dams, which have been suspended for years due to contractual non-compliance.” This decision serves to formalize the conditions necessary for the resumption of construction on the Cepernic Dam, which is projected for completion in 2030 and is expected to provide 1,860 GWh to the Sistema Argentino Interconectado grid, thereby enhancing the national energy matrix. In adherence to our obligations, we persist in the normalization of the energy sector. The initial significant detail: the dam is designated Cepernic in honor of the late governor of Santa Cruz Province, Jorge Cepernic, a prominent figure of Kirchnerism. This political movement has clearly influenced the naming of the dam, which is now to be managed by libertarians. It is yet to be determined whether the designation of the second dam will continue to be Néstor Kirchner. The project possesses the uncommon feature of receiving full financing from China, facilitated through funds disbursed in alignment with the progress of the work by the China Development Bank Corporation, the Industrial and Commercial Bank of China, and the Bank of China. Nonetheless, the project was interrupted due to a domestic political conflict. The formal pledge is now to resume the projects and have the dams operational by 2030 – it is yet to be determined under what designation. This project is directly associated with the original grant and the subsequent expansion of the program that establishes the substantial currency swap between Beijing and Buenos Aires. Indeed, the work commenced with the disbursement of approximately US$500 million in August 2009.
Subsequently, the transition in government occurred, accompanied by former president Mauricio Macri’s choice to reassess the agreement with Gezhouba for the construction of the dams, which retained the designation Kirchner-Cepernic. The initial public action undertaken by the Macri administration involved halting the projects due to concerns regarding potential corruption and adverse environmental effects. During that period, the Cambiemos administration identified the project as unfeasible, citing concerns over the potential extinction of the hooded grebe, a bird native to the province of Santa Cruz, which faces endangerment due to the environmental consequences of the dams, as outlined in the initial complaint. Nevertheless, in mid-2016, Beijing reminded Buenos Aires that a portion of the funds allocated for the projects had already been expended (and not necessarily on their advancement), indicating that should the project be reinstated, the funds would need to be reimbursed. The terms of the swap were “renegotiated” – the projects astonishingly reemerged under a different designation (henceforth, they would be referred to as Cóndor Cliff-La Barrancosa), with the currency swap reinstated. Despite various accelerations and delays, construction work persisted throughout the tenures of both the Macri and Alberto Fernández administrations. In late 2023, Javier Milei assumed power and early the subsequent year, he opted to suspend construction until further notice, with the remaining financing retained solely by Gezhouba. The firm maintained its wage payments and adhered to supplier agreements while initiating the layoffs mandated by the national government’s ambiguity and its unwillingness to endorse Addenda XII, which outlines the necessary actions for the projects in each fiscal year. The Chinese construction company has made it clear that no further financial contributions will be made until the commitment is formally signed. Between December 2023 and September 2024, the workforce peaked at approximately 3,500 employees, but ultimately reduced to about 160. By October, this number further declined to roughly 70, consisting mainly of directors, managers, and contracted security personnel. The construction firm emphasized to the government that the financing arrangement did not involve funds from this nation, thereby ensuring that it would not contribute to the fiscal deficit, as the requisite dollars were being directly negotiated by Gezhouba with their banking institutions.
As of late 2024, the most recent progress report indicated that the Cepernic Dam was 50 percent complete, while the Kirchner Dam stood at 30 percent completion. These projects face significant risks of deterioration due to natural erosion and vandalism if not revitalized. The original project indicates that the combined output of the two dams would account for 10 percent of Argentina’s total electric energy consumption. The Gezhouba issue has now been placed directly on the negotiating table, initiated by the Argentine government in discussions with Chinese leader Xi Jinping. This chapter was presumed to be concluded, with the dams set aside. Nonetheless, considering the rapid advancement in bilateral relations and the acknowledgment that this represents a pivotal chapter for both nations (particularly from the Chinese viewpoint), the intention is to reinvigorate it. China is aware that to facilitate this initiative, it cannot rely on public allocations designated for the project. The only viable solution to overcome the current impasse and restart construction is for the Chinese government to provide the necessary funding in full. Speculation arises from Buenos Aires suggesting that this could represent a sound financial strategy for Beijing, particularly within the context of Latin America. The same mechanism was employed at the Peruvian port of Chancay, located 60 kilometres from Lima, which was inaugurated in 2024 and is under the control of the Chinese state company Cosco Shipping, one of the three largest port operators globally. In relation to this project, Donald Trump issued a threat to impose 60 percent tariffs on all products entering the United States from Chancay. Although he ultimately did not follow through with this action, it is noteworthy that the US president does not uphold a strong relationship with Peru. The relationship between Argentina and China seems intricate, influenced by Milei’s electoral remarks and his overt criticism of the Beijing regime. In mid-2024, the Xi Jinping administration unexpectedly agreed to renegotiate the payment terms of Argentina’s swap arrangement with Beijing. In June, Argentina was expected to remit approximately US$2.906 billion to the People’s Bank of China for the initial six payments. The bank’s statutes prohibit disbursements to nations that have loan agreements with the International Monetary Fund, such as its Extended Fund Facility with Argentina, should they default on any obligations to their partners.
Nonetheless, discussions between IMF Managing Director Kristalina Georgieva and the Chinese government facilitated China’s agreement to renegotiate the debt, deferring the payments until next June, at which point Argentina is expected to cancel those installments. Clearly, with Cepernic involved, the prospect of a new amicable postponement is eliminated. China holds 3.65 percent of the IMF votes, positioning it as one of the most active shareholders in recent years during the meetings of the Board of Directors. If Argentina had not reached an agreement over this payment and had entered into default – and if, furthermore, China had denounced it at the meeting of the Board of Directors last June 13 – the Chinese bank’s statutes would have suspended the remittance of US$800 million. It is now imperative for the country to execute the transfer of funds to Beijing to avoid entering that predicament. At that moment, Argentina proposed to settle part of its obligations to the People’s Bank of China with approximately US$800 million committed by the IMF, a proposal that was ultimately declined by Beijing. Ultimately, the IMF intervened, facilitated by the personal involvement of Gita Gopinath at the explicit request of Georgieva, backed by the majority of IMF directors from Western nations.