In September 2021, El Salvador made history by adopting Bitcoin as legal tender, a bold bet promoted by President Nayib Bukele. The stated goal was to promote financial inclusion, reduce remittance costs, and attract foreign investment. However, two years later, the impact on the real economy remains limited, while structural challenges persist that hinder growth.
The Promise of Bitcoin
- Financial inclusion: 70% of the population did not have access to banking services. The state wallet #ChivoWallet aimed to democratize digital transactions.
- Remittances: Represent ~24% of GDP. Bitcoin promised to reduce fees, but its volatility and the preference for cash limited its use.
- Tourism and investment: There were hopes to attract crypto enthusiasts and startups, with incentives like investor visas. Projects like the Volcano Bonds (funded with Bitcoin) were announced, but they face delays.
Reality vs. Expectations
- Limited adoption: Less than 20% of the population uses Chivo regularly. Distrust in technology, technical failures, and lack of financial education are barriers.
- Macroeconomic risks: The IMF warned about financial instability. El Salvador's sovereign debt remains at critical levels (~85% of GDP in 2023), with a risk of default.
- Bitcoin volatility: Its value fell by ~60% in 2022, affecting savings and transactions. Many businesses accept it only formally.
Real Economy: Roots of Stagnation
Even without considering Bitcoin, El Salvador faces deep challenges:
1. Dependence on remittances: Mainly from the U.S., vulnerable to external crises.
2. Poverty and inequality: 26% live in poverty, with high labor informality (~70%).
3. Violence and security: Although homicides decreased, gangs still deter investments.
4. Low productivity: Traditional agricultural sector and little industrialization.
Hybrid Future?
The government insists that Bitcoin is a long-term bet. Projects like Bitcoin City (with geothermal energy for mining) and tax reforms aim to diversify the economy. However, without progress in education, infrastructure, and legal security, sustainable growth remains distant.
In conclusion
The adoption of Bitcoin was an innovative experiment, but not a magic solution. While the real economy struggles with structural issues, the focus on cryptocurrencies seems more like a distraction than a development engine. To grow, El Salvador needs comprehensive policies that combat poverty, promote formal jobs, and attract industry, beyond the noise of crypto. Time will tell if Bitcoin becomes an ally or remains a bold anecdote in a context of stagnation.
