Yeah he isn't the best defensively, but then neither is Perriera. Both would be very attacking fullbacks but Vargas would be a good option for the left wing also. I think Vargas is more of a winger but Downing would be ahead of him, so I can only assume that they would play him at left back...
I will be very honest, Vargas > Downing. Not cos Liverpool signed him, Vargas is superb winger...