If, the British military has grown smaller, then the Argentine military is in pathetic shape. They have had virtually no new inductions in the past 3 decades compared to the British-in the meantime, the UK has inducted newer subs and force multipliers.
The UK’s deterrent fleet of Typhoon fighters on the island can tear apart any Argentine aerial formation till the cows come home. A single Astute class submarine carries enough Tomahawks to level most assets in Buenos Aires while having enough torpedoes to sink most of its rickety fleet.
A sneak attack similar to the initial landing of Argentine troops during the Falklands campaign would neutralize the Typhoons and the lone destroyer. Argentina's modern German subs and P-3 Orions could be tasked to hunt the British sub prowling the island's waters. While the Falklands are 400 miles away from Argentina, they are thousands of miles from the UK. Reinforcement and resupply are expensive and complicated. The last engagement stretched the limits of Thatcher's political capital. The next one may end up with the islands renamed the Malvinas.
As to escalation, if Britain levels Buenos Aires, it will face a trade embargo from Latin America. And much of South America would jump in on Argentina's side, including Brazil. Would the EU even stand behind the UK during the ensuing economic hostilities?
My view is that the Brits need to station more assets on the Falklands. Because if the Argentines grab it, they won't have the political capital necessary to marshal the immense resources necessary to take it back.