El Salvador bitcoin adoption coincides with food crisis

By Raffaele Redi

IPC bulletin says there is a food crisis in the Latin American country.

Playa El Zonte, El Salvador                                 
Playa El Zonte, El Salvador - Photo: Shutterstock.

While on an El Salvador beach – El Zonte, for the record – estate agents are trying to sell luxurious properties in bitcoins, an ironic twist made the IPC report on the local Acute Food Insecurity situation and the government's much-awaited announcement regarding bitcoin ATMs that are awaiting repair come at the same time.

Only a few hours ago, the  IPC bulletin spoke of “more than 800,000 people in El Salvador, 13% of the analysed population, experiencing high levels of acute food insecurity, classified 'in crisis' or worse from July to August 2021, due to the combined impact of the Covid-19 pandemic, high food prices and low household income”.

At the same time, President Nayib Bukele announced on Twitter that “More than 500,000 users downloaded Chivowallet app to pay in bitcoins”, as he promised to fix all bitcoin cash machines in the next few days.

In the light of this, the only appropriate move from the Government in the last few hours seemed to be the removal of the minimum spend for ChivoWallet App users. It was $5 before but is now just $0.10, with discounts on certain goods expected to be announced in the next days.

Mixed outlook

At the same time, IPC was reporting on a health crisis, exacerbated by the Covid-19 pandemic, continuing to derail the financial security of the most vulnerable households. And the situation could worsen in March and May 2022.

“The worsening situation in the second projection coincides with the onset of the seasonal hunger period characterised by high food prices, low labour opportunities and the likely continued impact of the Covid-19 pandemic," stated IPC.

According to the institution, from September 2021 to February 2022, the departments of Morazán and Cabañas will likely continue to be in crisis, despite the expected increase in economic activity in different areas (mainly in the sale of agricultural labour), a rise in both salaries and the minimum wage in formal sector jobs, the upward trend in the flow of international remittances, and the harvest of basic grains such as maize.

Moreover, as the IPC reported, the high probability of the La Niña phenomenon may negatively affect the harvest, thus compromising the availability of food reserves, the primary food source for subsistence farming families. However, the increase in remittances and the harvest of basic grains such as maize and beans are expected to improve household incomes and guarantee food reserves.

Luxury homes on Bitcoin Beach

On the other side of the coin, the economic experiment which began as a community project to help local El Zonte kids stay in school, is now offering the opportunity to buy a luxury home or condo in El Zonte, now known as 'Bitcoin Beach'.

The local government recently announced it will exempt foreign investors from taxes on profits on bitcoin speculation in the country.

"If a person has assets in bitcoin and makes high profits, there will be no tax. This (is done) obviously to encourage foreign investment," Javier Argueta, legal adviser to President Bukele, told news agency AFP. "There will be no taxes to pay on either the capital increase or the income," he added, announcing the implementation of legislation against money laundering.

The move, designed to attract new investors and tourists, is expected to come in the next few days.

Bitcoin to US Dollar
Daily change
Low: 47269.7
High: 48092.5

Further reading: Bitcoin becomes legal tender in El Salvador

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