savior | The “mirage” of bitcoin

El Salvador’s president Nayib Bukele, who likes to portray himself on Twitter as a fashionable visionary, assures that his regime’s adoption of bitcoin will guarantee the future of the Latin American country. At the same time, he is waging an all-out repression campaign against street gangs that threatens to send him back to the undemocratic excesses of the past.

Posted at 5:00

Marc Thibodeau

Marc Thibodeau
The print

“Your investment is safe”


PHOTO MARVIN RECINOS, AGENCE FRANCE-PRESSE ARCHIVE, LA PRESSE PHOTO ASSEMBLY

This small business in the Pacific coast beach town of El Zonte highlights that it is possible to pay in bitcoin on September 4th.

Nayib Bukele firmly believes in the future of bitcoin and does not risk, at least in appearance, of being discouraged by the extreme fluctuations affecting this cryptocurrency.

In a tweet published in mid-June, the president of El Salvador urged people concerned about the 60% drop in value seen since November not to be alarmed.

“I suggest you stop staring at the chart and enjoy your life … If you’ve invested in bitcoin, your money is safe,” he said.

The 40-year-old politician returned to office a few weeks later by reporting online that El Salvador had just bought $ 2 million worth of this cryptocurrency under his watch to take advantage of the bear market.


PHOTO JOSE CABEZAS, REUTERS ARCHIVES

A woman displays a graph on her cell phone that shows bitcoin falling in San Salvador on July 13.

“Thanks for selling at a discount! “, He launched, reiterating an enthusiasm that led his regime to make El Salvador the first country in the world to recognize bitcoin as an official currency.

The law, adopted in September 2021, provides that this cryptocurrency can be used for any transaction, just like the US dollar, traditionally used in El Salvador.

The government created a phone app to access a wallet called Chivo – “cool” in the local slang – that allows for US dollar and bitcoin transactions, and it put $ 30 on each new user.


PHOTO STANLEY ESTRADA, AGENCE FRANCE-PRESS ARCHIVE

Each new user of the Chivo e-wallet receives $ 30 from the government. This is the main motivation of people downloading the app, a recent study points out.

Bukele said the launch was a great success and nearly 60% of adults in the country of 6.5 million have downloaded the app to their phones.

Almost a year later, the views of economists on the initiative are nothing short of confidential, often pessimistic.

One of the aims pursued by the regime has been to allow disadvantaged people who are unable to obtain a bank account to access online financial services.

“The Chivo wallet is useful for storing savings, but that’s it,” notes Frank Muci, a researcher at the London School of Economics who has closely studied the government program.

Salvadorans using the app also prefer the dollar option, says analyst Frank Muci, as bitcoin appears “too risky” due to its volatility.

The analyst sees another example of this distrust in the fact that very few Salvadorans established abroad send money to the country in this way. Less than 2% of transactions made in February were made through electronic wallets, according to the Central Reserve Bank of El Salvador.


PHOTO MARVIN RECINOS, AGENCE FRANCE-PRESS ARCHIVE

A Chivo ATM is vandalized during a protest denouncing President Bukele’s policies, including making bitcoin the country’s second official currency, in San Salvador on September 15.

A recent study by the National Bureau of Economic Research, which conducted a survey in the country, indicates that most people who downloaded the app did so in September 2021, when it was launched, and that hardly any new uploads. it only occurred in 2022.

The main motivation of users, notes the American organization, was to obtain the sum of 30 dollars donated by the government. Only 20% of them continued to use it, often sporadically, after having exhausted the bonus paid.

Colossal losses

Muci notes that the adoption of this cryptocurrency has cost the government nearly $ 350 million, not counting the theoretical losses of nearly $ 60 million related to the bitcoin acquisitions announced so far by the president.

These operations, the analyst notes, are also impossible to verify since no ministry has made accurate data available on the subject.


PHOTO FRED RAMOS, NEW YORK TIMES ARCHIVE

Thousands of protesters take to the streets in San Salvador to denounce the adoption of bitcoin on September 30.

Financial markets are “scared”, Muci says, of the uncertainty and improvisation surrounding the government’s economic policies and fear that the heavily indebted country will struggle to repay a US $ 800 million loan due in January.

Ruth Eleonora Lopez of the human rights organization Cristosal notes that the Bukele regime’s lack of transparency extends to all levels of government and increases the risk of corruption.


PHOTO SUPPLIED BY RUTH ELEONORA LOPEZ

Ruth Eleonora Lopez

La plupart des institutions de contre-pouvoir sont aujourd’hui contrôlées par des proches du président, privant la population d’alformations cruciales pour évaluer les actions du régime, tant en matière de respect des droits de la personne que dans le domaine économique, dit -She.

Nelson Rauda Zablah, a Salvadoran journalist who is very critical of President Bukele, recently noted in an open letter that the leaders of the cryptocurrency world shower him with praise on social networks and allow him to put the image of a “bold” leader on his face. of the international community.

The speech of the influencers who present El Salvador as a model to follow “why someone pays a coconut in bitcoin” is nothing but a “mirage”, he concludes.

Arrested for their “hard heads”


AGENCE FRANCE-PRESSE PHOTOGRAPHIC ARCHIVES, PHOTOGRAPHY THE PRESS

Gang members Mara Salvatrucha (MS-13) and Barrio 18 are crammed on top of each other in the Ciudad Barrios prison in the north of the country on 28 March.

Arbitrary arrests have been on the rise in El Salvador since President Nayib Bukele launched a crackdown campaign aimed at ending street gangs.

Boys aged 14 and 15 playing soccer in a poor neighborhood in Illopango, east of the Salvadoran capital, were arrested by police in April for their appearance.

“The officers told the family that the children had tough heads and provided no further justification for taking them. They also specified that they would serve 30 years in prison, ”explains Arjun Chauduri, a researcher from Amnesty International who recently visited the country.

The case is glaring, but it has nothing particularly original, as arbitrary arrests have multiplied since President Nayib Bukele launched a repression campaign designed to defeat the street gangs that have long enforced their law in the spring. to the population.

People are arrested simply because they have tattoos or because a member of their family has been linked to a street gang.

Arjun Chauduri, Amnesty International researcher

“There is also a lot of evidence that people in inner city areas where gangs often operate are being targeted,” he adds.


PHOTO MARVIN RECINOS, AGENCE FRANCE-PRESS ARCHIVE

A man is arrested for alleged ties to a gang as a state of emergency prevails in San Salvador on June 22.

The government has declared a state of emergency and has stepped up repressive operations across the country since a murder outbreak killed more than 60 people over a weekend in April.

In four months, more than 45,000 people have been arrested, says Ruth Eleonora Lopez of the human rights organization Cristosal, alarmed that many detainees have no way to challenge their incarceration.

Most, he says, are accused of having gang ties without having access to incriminating information against them.


PHOTO MARVIN RECINOS, AGENCE FRANCE-PRESS ARCHIVE

A police officer examines the tattoos of a suspected gang member on June 30.

The tough policy of the authorities encourages “anonymous reporting” and creates a climate of fear that extends to civil society groups worried about the regime’s undemocratic drift.

“If we ask questions, we are told that we are defenders of the clans,” says Mmyself Lopez, who accuses President Bukele of using the state of emergency to consolidate his hold on the country and its institutions.


PHOTO SALVADOR MELENDEZ, ASSOCIATED PRESS ARCHIVE

A heavily armed policeman stands guard in downtown San Salvador on March 27.

The Salvadoran leader ignores these criticisms and multiplies the refined online messages and videos showing his determination to defeat the street gangs.

He had promised in the campaign to fight against their influence, and after coming to power in June 2019 he managed to significantly reduce the homicide rate in the country, which has long been one of the highest on the planet.

According to the newspaper The lighthouseThe truce was in fact the result of informal negotiations conducted with the leaders of some gangs who agreed to maintain a relative calm in exchange for certain assurances, including the protection of influential members targeted by American extradition requests.


PHOTO MARVIN RECINOS, FRANCE-PRESSE AGENCY

Accused of having gang ties, several people were taken away by police in San Salvador on 22 June. More than 45,000 Salvadorans have been arrested in four months.

The outbreak of violence observed in April is the result, according to the daily, of the breaking of this tacit pact, which President Bukele denies.

Rather, the regime attributes its past successes to a “territorial control” plan whose details have never been made public.

Regardless of what human rights organizations say, the government’s current crackdown has broad public support.

M.myself Lopez explains this enthusiasm in part by the fact that Salvadorans want to believe that a “messianic” leader can free them from gang violence.


PHOTO YURI CORTEZ, AGENCE FRANCE-PRESS ARCHIVE

Like Quezaltepeque Prison, north of San Salvador, Salvadoran prisons are overcrowded.

Arjun Chauduri believes that the use of force is an illusion that does not take into account the socio-economic difficulties that drive many young people to engage in crime.

“Other governments have tried this approach in the past and have failed to stop the structural violence affecting El Salvador,” he warns.

Learn more

  • 103
    Number of homicides per 100,000 inhabitants in 2015, the highest reached in the country

    17.6
    Number of homicides per 100,000 inhabitants in 2020

    Source: InSight Crime

  • 70,000
    Estimated number of gang members in El Salvador

    Source: Reuters

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