Argentina’s Milei moves sovereign gold abroad, raising concerns about seizure – El Pais
The administration of Argentinian President Javier Milei has admitted that they moved at least some of the central bank’s $4.5 billion worth of gold abroad in order to “get returns,” but critics warn that the sovereign gold could now be seized.
Argentina’s central bank reserves include close to two million troy ounces of gold, and citizens are now consumed by the question of how much of this amount is no longer in the country, where it has been moved, and how vulnerable the bullion is to seizure by international creditors.
“The administration of far-right President Javier Milei admitted to the recent transfer of gold abroad, but didn’t specify quantities, the destination, or the purpose for this measure,” Spanish newspaper El Pais reported over the weekend. “Nor did the Central Bank provide any details. In a scenario of financial instability — and with the government facing the need to accumulate reserves — the decision generated suspicions and speculation. There are also fears that the gold could possibly be seized, due to long-standing legal cases that have been filed against Argentina by foreign creditors.”
The Milei government did not provide an official announcement about the transfer of the gold, nor did it come from the Banco Central de la República Argentina (BCRA). “Rather, the information came from the bank workers’ union, known as La Bancaria,” the report said. “Its leader — the left-wing legislator Sergio Palazzo — presented a request within the framework of the Law of Access to Public Information for the Central Bank of the Argentine Republic (BCRA), asking ‘if there [were any] operations to send gold bars abroad during the month of June.’”
“Specifically, he demanded to know if transfers of gold took place on June 7 and June 28 through Lumil — a private security firm that transports valuables — and British Airways,” the report added. “He also wanted to know the specific amounts, their destination, the administrative procedures taken, as well as the names of the officials involved.”
The BCRA now has 30 days to fulfill the access to information request, which they have yet to do. But Minister of Economy Luis Caputo has since acknowledged that the operation described by Palazzo did happen.
“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,” Caputo said in an interview with Argentinian television. “It’s much better to have it guarded outside, where they pay you something.” The speculation is that the gold went either to London or to Basel, Switzerland.
Caputo’s comments suggest that the gold was shipped abroad so that it could be deposited in order to earn interest, but economists have pushed back on the viability of the plan, saying that the cost of the transfer, including insurance, would absorb nearly all of the potential returns on investment.
President Milei himself hinted that the gold was transferred for use as collateral for a bridge loan. “The president said that Argentina already has sufficient U.S. dollars available to pay the maturity of interest on foreign debt — a payment of about $1.6 billion — which is due in January 2025,” El Pais wrote. “He claims that the bridge loan would be to pay an additional sum of $3 billion to foreign creditors.”
The revelations surrounding the bullion shipments sparked a furious response from Argentina’s main opposition, the center-left Unión por la Patria alliance, which criticized the lack of transparency and demand that BCRA president Santiago Bausili “urgently” explain how much gold was taken and why they moved the bullion out of the country. “The opposition also inquired about ‘what risks the operation entails’ and ‘if it’s possible that the [gold] could be seized while in transit, or from the bank where it was sent,’” the report said.
The fears over the gold’s possible seizure are not unfounded. “The country faces numerous unfavorable rulings abroad,” El Pais noted. “Some go as far back as 2012 — when the oil company YPF was nationalized — or even 2001, when Argentina defaulted on its debt.”
Other nations have faced challenges accessing funds held abroad. In 2019, Venezuelan leader Nicolás Maduro’s administration was blocked from accessing 30 tons of gold deposited in the UK after the Bank of England questioned the legitimacy of his government.
Security concerns aside, the specter of corruption and inside dealing also hangs over the move, as Economy Minister Caputo and BCRA president Bausili were partners in a consulting firm until they were appointed to their respective posts shortly after Milei’s election victory in December 2023.
Source: https://kitco.com/