El Salvador’s President Nayib Bukele went all in on bitcoin. The cryptocurrency’s steep losses are stoking fears of a debt default.
Santiago PérezThe plunging value of bitcoin has hurt investors in cryptocurrency everywhere. The stakes are especially high in El Salvador, the indebted Central American country whose president has spent hundreds of millions of dollars in taxpayer money buying bitcoin and rolling it out as a national currency.
To avoid a default, El Salvador needs hard currency to pay for imports like oil and make an $800 million bond payment in January. Economic turmoil risks sparking a fresh wave of migrants to the U.S. One in four Salvadorans live abroad, mostly in the U.S., and about three of every 10 dollars in the country’s economy come from remittances.
“The president seems rudderless in terms of economic policy-making, and as a consequence, El Salvador is sleepwalking into a potential sovereign default crisis,” said Frank Muci, a fellow at the London School of Economics who does research on El Salvador. “The signal you are sending is that you have no idea what the country’s priorities are and what to do to get out of the hole.”El Salvador’s debt is among the worst performers in emerging markets this year.
El Salvador’s Finance Minister Alejandro Zelaya said early this month that the bitcoin bond had been delayed because of the cryptocurrency’s drop in value. “For some investors this discourages the bond’s purchase,” he told reporters.
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