Argentina’s $4.5 billion in gold reserves mysteriously vanished overnight, fueling suspicion and intrigue as President Milei’s administration admitted to moving some of it abroad without giving clear details on how much, where, or why. The government claims it’s safer to store the gold overseas to earn interest, possibly in London or Basel, but critics worry about potential seizures due to legal disputes with foreign creditors. With Argentina facing financial instability, the gold might be used as collateral for loans, but many fear the country could lose it, likening the move to pawning precious family heirlooms.
As Argentina’s economic situation spirals, the government of President Javier Milei is eyeing an unconventional source of salvation: a massive loan from Saudi Arabia‘s Sovereign Fund, one of the largest and most powerful in the world, boasting a staggering $925 billion in assets. While such a move could inject the much-needed cash to stabilize Argentina’s finances, the political and geopolitical cost could be enormous—forcing Milei to navigate treacherous waters both at home and abroad.
The urgency behind this risky outreach becomes clear when examining Argentina’s economic crisis. In just seven months, the Central Bank burned through a jaw-dropping $12.4 billion in reserves in an attempt to contain the volatile exchange rate and prevent further devaluation of the peso. The projections for 2024 paint a grim picture, with expectations of a higher deficit than the already disastrous 2023. The stakes couldn’t be higher, and for Milei and his finance chief, Toto Caputo, this may be their last real shot at avoiding total financial collapse.
But securing the loan won’t be as simple as signing a few contracts. The Saudis have thrown two formidable challenges onto the negotiating table—each with the potential to ignite political and personal firestorms for Milei.
The Jerusalem Dilemma: A Political Betrayal?
The first of these Saudi demands hits Milei at his very core, threatening to dismantle one of his most ardently held promises. The Saudis are insisting that Milei suspend his plans to transfer Argentina’s embassy in Israel to Jerusalem—a move Milei had previously pledged as part of his religious and political commitment to the Jewish state. It’s not just any promise; it’s a deeply personal one made to Israel during his last visit, a commitment he equated with faith and integrity.
Backtracking now would be seen as a significant betrayal, not only in Israel but also among Milei’s supporters. Such a reversal would risk undermining his credibility on the global stage, while also alienating a powerful ally in the Middle East. Yet, the looming specter of Argentina’s economic collapse may force Milei’s hand. Can he truly afford to keep his word when billions of dollars are on the line?
Messi’s Role in Saudi Leverage: The AFA Feud
The second condition takes an unexpected turn into the realm of sports diplomacy, thrusting none other than Lionel Messi into the middle of the geopolitical negotiations. The Saudis have requested that Argentina’s World Champion soccer team, led by Messi, participate in a grand spectacle organized by the Sovereign Fund later this year. It’s more than just a soccer match—this is a mega-event that will showcase Saudi Arabia’s next wave of global investments.
This demand presents a deeply awkward problem for Milei. His relationship with the head of Argentina’s Football Association (AFA), Chiqui Tapia, is nothing short of hostile. The two are locked in a bitter struggle over the governance of sports in Argentina, with Milei’s government recently pushing for Sports Corporations to have the ability to purchase football clubs—a move fiercely opposed by the AFA. The gulf between them is so vast that Milei has had to send Buenos Aires point man Sebastian Pareja to try to placate Tapia, who holds the power to bring Messi and the national team on board for Saudi Arabia’s event.
Adding further complexity, Minister of Finance Federico Sturzenegger recently put pressure on the AFA to accept these corporate changes within a year, escalating tensions just as the Saudis’ request emerged. For Milei, it’s a diplomatic tightrope: how does he navigate internal disputes within Argentina while also catering to the demands of a foreign power?
Saudi Funds: The Uncertain Payoff
Even if Milei is able to finesse these demands, the question remains—will it be worth it? The Saudi Sovereign Fund is notoriously selective with its investments outside its borders, typically funneling over 80% of its wealth into domestic projects. Major foreign holdings include stakes in big names like Uber, Boeing, Meta, and Citigroup, but these have been more about strategic investments than financial rescues.
Rumors about Saudi financing for Argentina have circulated for years. The most tangible step was the Public Investment Fund’s (PIF) announcement of an $11 billion credit line in 2018. But, to date, there’s no precedent of the Saudis providing a large-scale loan to another government for general financial relief. That leaves Milei and Caputo in uncharted territory.
The complexity of these negotiations isn’t lost on Milei’s team. As desperation mounts and conventional Western financial avenues close off, the search for alternative financing has led to this delicate outreach to the Arab world. Toto Caputo has publicly downplayed Argentina’s high country risk—a key indicator that has effectively locked Argentina out of global credit markets—suggesting it’s not a decisive factor for their talks with Saudi Arabia. But such optimism could prove risky if Saudi Arabia, ultimately, chooses to protect its own financial interests over helping Argentina weather its crisis.
The Final Gambit
For Milei, the Saudi loan represents much more than a financial lifeline. It’s a pivotal moment that could define his presidency and the future of Argentina’s economy. But with each dollar comes a cost—whether it’s betraying international promises, sacrificing domestic relationships, or allowing foreign powers to exert influence over Argentina’s future.
In the end, will Milei make these sacrifices? Can he navigate the intricate dance of geopolitics, finance, and national pride? One thing is clear: Argentina’s economic survival may now depend not just on its balance sheets but on its ability to play by Saudi Arabia’s rules.
