El Salvador loses more than 60 million dollars in its “failed” bet on bitcoin

There is no official figure for the expenditure that the government of El Salvador has incurred to implement bitcoin as a currency. As far as is known, through official announcements on currency purchases and investment, El Salvador would have spent more than 200 million dollars on its most ambitious economic project, which experts call “failed”, a year after being legalized.

El Salvador claims to have bought 2,381 coins at different prices in the space of a year. The total value paid for those coins is around 106 million dollars. But today, compared to the current value of bitcoin, which is around 19,252 dollars, these coins would have an approximate value of 45 million dollars, that is, 57% less than the price paid for them.

“With bitcoins, like other assets, their value is their market price, and right now the market price is around $19,000. So, the currencies have lost more than half of their value”, explained the economist Rafael Lemus to the voice of america.

The Central American country has also invested in exclusive ATMs to use the cryptocurrency. It also gave a $30 bonus to each Salvadoran of legal age who downloaded the government electronic wallet intended for bitcoin transactions.

President Nayib Bukele’s allies in Congress also approved a $150 million trust fund to seek “financial inclusion” that, according to economists, has not produced results.

José Luis Magaña is of the opinion that the losses are not only monetary, but rather opportunity costs.

“Last year, 11 million dollars were cut from basic education. $32 million was cut from national hospitals. The hospital infrastructure had 35.4 million dollars allocated, of which at the end of the year only 3 million dollars were spent”, said the economist.

According to Magaña, the country of 7 million inhabitants stopped using these public funds to meet primary obligations for pursuing a speculative asset.

But the government remains optimistic on the issue. The head of the Treasury said publicly in July that the Central American country has not lost money because it has not sold bitcoins.

The Salvadoran government did not respond to a request for comment from the voice of america. There is also no public report on the Bitcoin Law after a year of cryptocurrency being legalized.

A study by economists and researchers from the Economic Outlook platform indicated that the three great promises of improving the sending of remittances in El Salvador, the attraction of investments and financial inclusion do not show significant progress.

“Since the entry into force of the law, 7,043.7 million dollars have entered in family remittances, of which 130.83 million were through digital wallets. In other words, only 1.8% of remittances have entered under this mechanism”, the study states.

Regarding Foreign Direct Investment (FDI), in the first quarter of 2022, 165 million dollars of investment were reported, “less than the 175.9 million in the same quarter of 2021,” the study cites.

The National Bureau of Economic Research published a study in April of this year that reveals that 80% of Salvadorans who downloaded the government wallet after the $30 bonus did not put money back into it.

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