The Central American country of El Salvador had the scoop in September 2021: Bitcoin became legal tender. An initiative of the populist and very active online president Nayib Bukele. The initiative was supposed to bring foreign investment and more tourism to the country. We take stock, because more than a year later it seems to have been mainly a PR stunt.
“The president wanted to show that El Salvador is cool and innovative with the introduction of bitcoin, but that doesn’t have much basis. It’s part of his PR story,” said Chris van der Borgh, of the Center for Conflict Studies at the University of Utrecht. He has been doing research in El Salvador for years.
The president also wanted to send a message of optimism that poor Salvadorans should draw hope from. But according to Van der Borgh, you hardly notice the bitcoin in El Salvador. “I have not seen anyone pay with it. It is not really alive. A taxi driver is more concerned with whether he earns enough and his safety than with whether customers can pay him with bitcoin.”
Yet Bukele seems to have gambled with his country’s finances, because the bitcoins were bought with taxpayers’ money. In the meantime, $ 65 million in value would have evaporated. Analysts and creditors fear the country will be unable to service its debt, including about $667 million due in January.
The government does not say exactly how many bitcoins were bought. “But if you go by the president’s tweets about the bitcoin purchases, there is an amount of $ 100 million involved,” says economist and analyst Tatiana Marroquin. And with the rollout of bitcoin as legal tender, another $200 million. “That was spent on a large campaign, bitcoin ATMs and the bitcoin credit that Salvadorans received,” said Marroquín.
The economist sees no growing concern among the population. “It is hardly about the low price of the digital currency. This is mainly because bitcoin is used much less than expected. The low price therefore hardly affects the Salvadoran economy.”
President Nayib Bukele also has a plan for a ‘Bitcoin City’ off the coast of El Salvador:
In Salvadorans – the country has a population of 6.5 million – the bitcoin fever has barely passed: a survey in September showed that less than a quarter of those surveyed had paid something with it, reports The Economists. Some did so only to be able to download the digital wallet, in which they received $ 30 in digital money from the government.
Economist Marroquín calls the introduction of bitcoin an economic failure, but a successful PR strategy. “That was also one of the goals of the president: he wanted to change the narrative about El Salvador. People should no longer just talk about El Salvador in the context of, for example, gang violence, but as one of the first countries to adopt bitcoin. “
Bukele has dealt with this gang violence with a heavy hand: almost 60,000 people are said to have been arrested. Human rights groups complain about the arbitrary arrests and say that many innocent people have also been arrested. “The introduction of bitcoin is viewed with suspicion from an international perspective. In El Salvador people laugh a bit about it,” says Van der Borgh.
And despite the low price of bitcoin, the president has not yet lost his faith. To express his confidence in the crypto, he has announced that he wants to buy a bitcoin every day, despite the low price. A not very sensible choice, says Marroquin. “There is a fiscal crisis, there is poverty and some of the Salvadorans do not have a pension. This money could have been spent on that.”