Posted at 5:00 a.m.
“Your investment is safe”
Nayib Bukele firmly believes in the future of bitcoin and is not likely, at least in appearance, to be discouraged by the extreme fluctuations affecting this cryptocurrency.
In a tweet posted in mid-June, El Salvador’s president urged people worried about the 60% drop in value seen since November not to be alarmed.
“I suggest you stop staring at the chart and enjoy life… If you’ve invested in bitcoin, your money is safe,” he said.
The 40-year-old politician returned to the charge a few weeks later by reporting online that El Salvador had just bought $2 million worth of this cryptocurrency under his watch in order to take advantage of the bear market.
“Thank you 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 American dollar, traditionally used in El Salvador.
The government created a phone app to access a wallet called Chivo — “cool” in local slang — allowing transactions in US dollars and bitcoins, and put US$30 in it for each new user.
Bukele said the launch was a big success and nearly 60% of adults in the country of 6.5 million people had downloaded the app to their phones.
Nearly a year later, the opinions of economists about the initiative are reserved, to say the least, often pessimistic.
One of the objectives pursued by the scheme was to enable disadvantaged people who are unable to obtain a bank account to access online financial services.
“The Chivo wallet is useful for keeping savings, but that’s about it,” notes Frank Muci, a researcher at the London School of Economics who has studied the government program closely.
Salvadorans who use the app also prefer the dollar option, says analyst Frank Muci, since bitcoin appears “far too risky” due to its volatility.
The analyst sees another illustration of this distrust in the fact that very few Salvadorans established abroad send money back to the country by this means. Less than 2% of transactions made in February were made through electronic wallets, according to the Central Reserve Bank of El Salvador.
A recent study by the National Bureau of Economic Research, which conducted a survey in the country, indicates that the bulk of people who downloaded the application did so in September 2021, when it was launched, and that hardly any new loading only occurred in 2022.
The main motivation of the users, notes the American organization, was to obtain the sum of $30 given by the government. Only 20% of them continued to use it, often sporadically, after having exhausted the bonus paid.
Muci notes that the adoption of this cryptocurrency has cost the government almost US$350 million, not counting the theoretical losses of almost $60 million related to the acquisitions of bitcoins announced by the president so far.
These transactions, notes the analyst, are also impossible to verify since no ministry has made available precise data on this subject.
Financial markets are ‘frightened’, says Mr Muci, by the uncertainty and improvisation surrounding the government’s economic policies and fear that the heavily indebted country will struggle to repay an 800 million US dollar loan coming 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 corruption risks.
Most counter-power institutions are now controlled by people close to the president, depriving the population of crucial information to assess the regime’s actions, both in terms of respect for human rights and in the economic field, says -she.
Nelson Rauda Zablah, a Salvadoran journalist very critical of President Bukele, recently noted in an open letter that leaders in the world of cryptocurrencies shower him with praise on social networks and allow him to give himself an image of a “bold” leader in the face of the International community.
The speech of influencers presenting El Salvador as a model to follow “because someone pays a coconut in bitcoin” is however nothing more than a “mirage”, he concludes.
Apprehended for their “tough heads”
Arbitrary arrests have been on the rise in El Salvador since President Nayib Bukele launched a campaign of repression meant to put an end to street gangs.
Boys aged 14 and 15 who played football in a poor neighborhood of Illopango, east of the Salvadoran capital, were apprehended by police in April because of their appearance.
“Officers told the family that the children had badass heads and gave no further justification for taking them. They also specified that they would serve 30 years in prison,” explains Arjun Chauduri, an Amnesty International researcher who recently visited the country.
The case is striking, but has nothing particularly original, since arbitrary arrests have multiplied since President Nayib Bukele launched a campaign of repression in the spring supposed to overcome street gangs who have long imposed their law on the population. .
People get 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 overly targeted,” he adds.
The government has declared a state of emergency and has stepped up repressive operations across the country since an outbreak of murders killed more than 60 people in 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, who is alarmed that many detainees have no way to challenge their incarceration. .
Most, she says, are accused of having ties to gangs without having access to incriminating information against them.
The authorities’ tough policy favors “anonymous denunciations” and creates a climate of fear that extends to civil society groups worried about the regime’s anti-democratic drift.
“If we ask questions, we are told that we are defenders of the gangs”, relates Mme Lopez, who accuses President Bukele of using the state of emergency to consolidate his grip on the country and its institutions.
The Salvadoran leader ignores these criticisms and multiplies online messages and polished videos showing his determination to overcome street gangs.
He had promised in the campaign to fight against their influence, and succeeded after coming to power in June 2019 to significantly reduce the homicide rate in the country, long one of the highest on the planet.
According to the daily El Farothe lull was in fact the result of informal negotiations conducted with the leaders of certain gangs who agreed to maintain relative calm in return for certain assurances, including the protection of influential members targeted by American extradition requests.
The outbreak of violence observed in April resulted, according to the newspaper, from the rupture of this tacit pact, which President Bukele denies.
Rather, the regime attributes its past successes to a plan of “territorial control” the details of which have never been made public.
Despite what human rights organizations say, the government’s current crackdown is supported by a good portion of the population.
Mme Lopez explains this enthusiasm in part by the fact that Salvadorans want to believe that a “messianic” leader can free them from gang violence.
Arjun Chauduri thinks that the use of force is an illusion that does not take into account the socio-economic difficulties pushing many young people to turn to crime.
“Other governments have tried this approach in the past and have failed to stop the structural violence affecting El Salvador,” he warns.
- Number of homicides per 100,000 inhabitants in 2015, the maximum reached in the country
- Number of homicides per 100,000 population in 2020
Source: InSight Crime
- Estimated number of gang members in El Salvador