Liber-dud? Milei Government Begins Shipping Gold Reserves Overseas

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Javier Milei's election as President Of Argentina was a watershed moment in the nation's history that was supposed to represent a paradigm shift in its political climate. For decades, the country has been mired in economic crises spurred from policies made by liberal administrations. Milei's boisterous campaign toward the presidency to change the course that neoliberal, if not socialist, political compass led the country to by replacing it with an iconoclastic right-wring libertarian platform built upon one ideal that served as its guiding light: liberty. However, in the months since Milei has taken office, critics have come to question his policy making by taking note of its similarities to that of the predecessors he campaigned on being the polar opposite of. Those contradictions beg the question as to whether or not Milei is truly a populist or if he merely exploited that ideology as a political vehicle to advance his own aims.

Claims that Milei has privatized Argentina's public resources into the hands of international oligarchs have become emboldened following the emergence of reports that Milei's government has begun transferring its gold reserves abroad. Argentina presently holds reserves of approximately 2 million troy ounces of gold which is valued at $4.5 billion dollars. The value of those reserves strikingly pails in comparison to the $275 billion in foreign debt that Argentina owes. With the country facing foreign currency maturities of nearly $17 billion in 2024, the transfer of Argentina's gold abroad puts the country in peril of the possibility the reserves could be seized due to debts owed to international creditors like the International Monetary Fund who is owed $7.5 billion of that $17 billion in debt due for repayment this year.

Although the Milei administration admits that it has transferred portions of its gold reserves abroad, it has not provided the public with any insight on the amount that has been transferred or the purpose for which it has been sent overseas. The revelation of the transfer was not even brought to the public by Milei's goverment or Argentina's central bank at all. Instead, the transfer was uncovered by La Bancaria -- the country's bank workers' union helmed by Sergio Palazzo, a left-wing legislator and political opponent of Milei's. Palazzo uncovered the operation by presenting a public information request to the Central Bank Of The Argentine Republic. The request specifically asked for a disclosure of any transfers of gold between June 7th and June 28th through the private security firm Lumil and British Airways. Although Argentina's central bank has not formally responded to Palazzo's public information request, Argentine Minister Of Economy Luis Caputo verified that a transfer had been conducted.

Caputo explained the rational behind the decision in an interview with Argentine television network La Nación+. “It’s a very positive move… if you have gold in the BCRA, it’s as if you have [assets] inside that cannot be used for anything. If you have it outside the country, you can get returns,” he stated. The economic minister would further emphasize his position, stating. “It’s much better to have it guarded outside, where they pay you something,”. Caputo's remarks imply that the basis for the transfer of Argentina's gold reserves was to deposit it internationally where it could earn interest. However, any such return would not be enough to justify the measures given how it would be all but wholly off-set by the cost of the transfer and prerequisite to ensure the reserves.

Alternatively, the idea that the gold could be used as collateral to take out a bridge loan for payments due on outstanding foreign debt has been speculated. Spanish newspaper El País reports that President Milei has hinted that securing a bridge loan was the motive behind the transfer. According to its report, Milei claimed that a bridge loan could be used to pay $3 billion to foreign creditors. The benefits of a bridge loan are not without risk, prompting outrage of Milei's opposition. “Removing gold from our country implies risks that gold doesn’t have when it’s in the Central Bank’s vaults. For example, it can be used as an asset, in the case of sanctions being levied against the Republic,” stated Carlos Bianco, a minister for the provincial government of Buenos Aires. Unión por la Patria (Union for the Nation), Milei's main opposition in the National Congress Of Argentina, chastised the president for his lack of transparency. The center-left alliance demanded that BCRA President Santiago Bausili provide the National Congress with information on the purpose of the depletion of reserves, how much of it was sent overseas, and to where.

The transfer comes at a time when Argentina's economy faces enormous financially instability as Milei's small government reforms take shape, emphasizing the needs for the gold reserves. However, the impact of the transfer enabling Argentina's ability to repay its foreign debt could help reduce the country's risk level as well. In doing so, that could open Argentina to new lines of credit by improving its credit rating. Argentina has recently been able to upgrade its long-term foreign and local currency sovereign credit ratings to CCC from Selective Default in March, following a $100 billion debt restructuring.

The sense of urgency espoused by opposition to Milei is rooted in its view that the risks the over carries outweigh the benefits. Concern exists that long-standing demands from international creditors could lead to a freeze or seizure of the assets. In 2019 Venezuela famously had 30 tons of gold worth $1.95 billion that it deposited in the UK frozen after the Bank Of England raised its doubts of the legitimacy of the government of Nicolás Maduro after the results of the 2018 Venezuelan Presidential Election which saw the country have its lowest voter turnout since the passage of its current constitution in 1999. In 2023, Venezuela lost its most recent appeal to have the asset unfrozen. Given the even more resounding outcry against the 2024 Venezuelan Presidential Election, it appears that the gold the country has sent abroad will not be returned as long as Maduro remains in power. While Argentina does not face the same political instability that Venezuela does, its economic situation remains precarious nevertheless. A deterioration of the nation's economic outlook could prove to be used as reason to hold whatever it has sent of its own gold reserves overseas.

Another element of the decision of the Milei administration to leverage its gold reserves is the president's platform of eventually ridding the country of it central bank altogether. Renowned investigative journalists Whitney Webb and Mark Goodwin have been outspoken about potential of Argentina going away from fiat currency by replacing it with digital commodity-backed stable coins that would put the country's monetary policy in the hands of private sector entities. Webb pointed to the inclusion of former employees of JPMorgan and other Argentinian branches of major Wall Street Banks in his government to highlight her belief that the Milei is more akin to the neoliberal crony-capitalists that left Argentina's economy in such poor standing. Webb suggests that Milei;s policies are more similar to that of former President Of Argentina Mauricio Macri than the libertarian cult hero he campaigned on being.

A future in which Milei envisions an Argentina without a central bank beckons questions about what will ultimately happen to the gold reserves the country holds. That fundamental tenet is part of a political platform built upon putting the fate of Argentina's economy in the hands of foreign interests, as embodied by Milei's devout commitment of dollarization. A commitment Milei has such conviction in that he has even suggested adopting the US Dollar as the official currency of Argentina. Placing the USD so central to the Argentinian economy of the future is an ominous portent for the country's gold reserves now overseas as the Milei regime becomes increasingly dependent on foreign influence on shaping its economy.