The U.S. has an immediate and actionable vital national security interest in the economic survival, recovery and growth of Argentina.
On April 11, the International Monetary Fund approved a $20 billion balance-of-payments loan to Argentina to shore up the country’s foreign-exchange reserves. On the same day, the World Bank Group and the Inter-American Development Bank Group approved development finance packages for Argentina of $12 billion and $10 billion, respectively.
This extraordinary $42 billion financial transfusion is a clear message of hope for Argentina’s economic survival, recovery and growth. The U.S. must move quickly to seize the opportunity provided by a rising Argentina to enhance American geostrategic security by helping the country to unlock its substantial reserves of critical minerals and escape the sovereign debt trap.
Argentina has substantial reserves of strategically important critical minerals such as lithium and shale oil and gas. It is in the U.S. strategic interest to deny China access to such resources. Argentina’s lithium reserves of about 20 million tons account for 20 percent of total world reserves. Lithium is the key ingredient for rechargeable batteries that power electric vehicles — a sector dominated by China.
With recoverable shale reserves of 16 billion barrels of oil and 308 trillion cubic feet of gas, Argentina would rank among the top five globally. President Trump should help ensure that American finance, technology and expertise are available to Argentina to unlock the economic potential of its lithium and shale oil and gas resources, and that the U.S. market remains open to exports from Argentina.
Beyond critical minerals reserves, Argentina has enduring strategic value by virtue of geography, overlooking the vital sea lines of communication that connect the south Atlantic to the south Pacific. President Javier Milei, together with his economy minister, Luis Caputo, must find a way to monetize the country’s strategic value.
Accordingly, Milei should persuade Trump to support a proposal to convert all of the outstanding Argentine sovereign debt held by official creditors into grants by the end of 2026. Such a conversion would eliminate about $98.9 billion of debt (equivalent to about 14.7 percent of GDP) per the projected statistics contained in the IMF Staff Report.
In return, 10 years following the date of such conversion, Argentina would voluntarily pledge to donate each year to a special purpose development fund for Latin America (managed jointly by the IMF and the World Bank Group) an amount equal to up to a maximum of 0.25 percent of nominal GDP in terms of U.S. Dollars, provided that after giving effect to such donation the Argentine federal budget will have an overall surplus of at least 2 percent of GDP, a step necessary to safeguard the country’s financial resilience.
The Argentine stock market has outperformed the U.S. stock market over the 12 months ending in April, delivering an extraordinary return of 48.5 percent compared to 12.25 percent. The same has been true over the comparable three-, five- and 10-year periods. Clearly, investors are signaling confidence in Argentina’s growth potential.
But if Argentina is to grow, it must be unshackled from the grip of a heavy debt-service burden. In conjunction with the proposal to convert all of the debt held by official creditors into grants, Milei should also offer to swap at face value all of the outstanding Argentine sovereign debt held by private-sector creditors for a like amount of Argentina Perpetual Participation Certificates (a twist on the old British Consols). The proposed swap would cover about $165.5 billion of Argentine sovereign debt held by private-sector creditors (equivalent to about 24.7 percent of GDP), per the IMF Staff Report.
In lieu of interest, the holders of the participation certificates would be paid an aggregate annual amount equivalent to 0.75 percent of nominal GDP of the preceding calendar year. If nominal GDP grows in any subsequent year, the size of the participation payments for that year would increase; if nominal GDP declines, the size of the payments would decrease. The participation payments would be free of Argentine taxes. Likewise, any realized gains or losses as a result of trading participation certificates would not be included in Argentine taxable income. Participation certificates denominated in Argentine Pesos and U.S. Dollars would be listed on the Buenos Aires Stock Exchange and New York Stock Exchange, respectively.
According to the IMF Staff Report, private Argentine citizens collectively hold about $200 billion in cash and cash equivalents outside the country. This “flight capital” represents a unique pool of “country knowledgeable,” investible capital that could potentially anchor Argentina’s program to privatize state-owned enterprises. While it is difficult to estimate the total cash proceeds of such privatizations, $15 billion may be a reasonable figure. As an example, the Argentine petroleum company YPF is owned 51 percent by the state and 49 percent by the public. The shares held by the public have a current market value of about $6 billion. The shares held by the state would have a similar valuation.
Opportunity is knocking at the door of a rising Argentina. What will the answer be?
Samir Tata is the founder and president of International Political Risk Analytics, an advisory firm based in Reston, Virginia, and author of the book, “Reflections on Grand Strategy.”
