Bukele's Bitcoin gamble in El Salvador

Ian Bremmer's Quick Take:

Hi everybody. Ian Bremmer here, kicking off your week with a Quick Take. Hope everyone's doing well. I thought I would talk about El Salvador, a surprising amount of news coming out of this comparatively small country.

First of all, you've got a president who's been in power now for about a year, Nayib Bukele, he's all of 39 years old and 90% approval ratings, pretty consistent over the last year. And in part, that's because there's been massive violence and huge economic problems and extraordinary corruption in the country. And this is a guy who was a former advertising executive, he was a local mayor, and ran with a lot of charisma, with of course, an enormous amount of social media savvy. In fact, if you follow him on social media, he kind of styles himself the Elon Musk of the Northern Triangle, which is not really a great thing I grant you. The Northern Triangle is like El Salvador, Honduras, and Guatemala. And I mean, I guess if there is one such person that has to be Elon Musk, he's the guy.

But the point is he's really into showing himself as being hip, and technology savvy, and in the moment, and not in anybody's pocket, and I can do whatever I want. And indeed, he has been doing pretty much anything he wants. He said he was going to jail people in El Salvador, in his country, that broke the lockdown. The court said you didn't have the right to do it. He did it anyway. And he occupied parliament with military forces. He's removed his top judges, ignoring the legal process that needs to occur to make that happen. I mean, it feels like there are literally no checks and balances legally on Bukele in El Salvador right now. It's kind of like a Hungary Victor Orban type situation, except when there's no real opposition and the entire population is in favor. And by the way, no European Union either.

Now, there is the equivalent of a check and balance on Bukele and that's not a formal international structure, but rather the fact that his economy is really dependent on the United States. They use the US dollar as currency, and they need support from the IMF because their economy continues to deteriorate. He's handled coronavirus relatively well in terms of spread of cases and whatnot, I mean, almost in a Chinese type way, but that hasn't helped them in terms of getting hit with this massive global recession, the way everybody else has. And if you want support from the IMF, he would need to be much more transparent in the way he governs, which he's not prepared to do. In fact, just this weekend, he arrested yet another high-level opposition member on very dubious corruption claims. And at the same time, disbanded an OAS, Organization American States, unit that was meant to engage in anti-corruption oversight in El Salvador, supported by the United States, said, "I'm not doing that."

So clearly, he is indifferent to the fact that the Americans are not going to allow the IMF, and America's the biggest stakeholder there to engage in further lending. So what do you do? Well, I mean, if you're most leaders, you start putting capital controls on and try to have more direct control of your local economy and your currency, which is really hard to do when you're dollarized. But if you're Bukele, you do something completely unique, which is you say that Bitcoin is going to be the legal tender of El Salvador going forward.

He said, he's going to put legislation in front of the Congress. It will certainly be approved. This will be the first country in the world where Bitcoin is legal tender. Now to be clear, he is not going to be able to make the dollar illegal because a lot of people won't be able to use Bitcoin. Also, if you've watched Bitcoin, it's massively volatile, enormous swings, from dizzying highs to staggering lows sometimes over the course of hours and days. And I mean, if you're a relatively poor person, you don't want your currency to have that level of uncertainty. That's like all of these retail investors invested in GameStop and some of them made millions of dollars and a lot of them were wiped out. And that's why you kind of worry about what happens when the average citizen starts treating the marketplace as a casino.

And here, Bukele is basically saying that's going to be forced upon them. He can get away with it because of his extraordinary popularity, but the challenges for the average El Salvador are really significant, not to mention the fact that Bitcoin is itself hard to transact and expensive to transact in. And so, this is a very interesting new way to think about de-dollarizing. And a bunch of smaller economies around the world that don't have great relationships with the United States and are facing enormous financial pressure, especially if inflation starts picking up in the next year, are going to find this to be very worthwhile watching. It's a serious experiment. A lot of Sub-Saharan African countries, other Central American countries, maybe even some Asian countries. Sri Lanka would be an interesting one to watch because they are in a very similar economic position.

And again, capital controls would be hard for them. But ultimately this is not the thing if you are a crypto advocate that makes you say, "Bitcoin to the moon." It is an interesting thing, geopolitically, because it's one more way that the United States, by trying to weaponize its dollar, to use it as a political and economic club to get countries more aligned with the Washington consensus or else. China is a hedge for some of those countries, Bitcoin is increasingly a hedge for at least one of those countries itself. So pretty interesting stuff. Let's watch El Salvador closely.

Final point. Let's keep in mind that one of the reasons El Salvador is important in the United States is because of so many illegal immigrants coming out of El Salvador because they have no opportunity for themselves and their family, through Mexico, into the United States. It was a problem for Trump, is a problem for Biden, for Kamala Harris. The fact that this president is trying to avoid getting leveraged under America's influence by moving to Bitcoin is something that will make Bitcoin more problematic for US regulators. And so if anything, there's probably more likely to be a backlash when you've got a whole bunch of people saying, "Bitcoin uses too much energy. It's not green. It's used by people that want to engage in illegal activities." And now, it's currency for Nayib Bukele, who's a problem for American national security.

So on balance of, I was going to say, is this a good move for Bitcoin or a bad move for Bitcoin? Geo-politically, I would say it's actually a bad move for Bitcoin, but it's an interesting one for the president of El Salvador. 90% approval, who knew? Okay. Take it easy, avoid fewer people. Talk to you soon.

Okuafo Pa means good farmer in the Twi language of West Africa. Hence, the naming of the project reflects the value of good farming and the rewards it brings to the people of Ghana. The Okuafo Pa Project will support Ghana's sustainable development by promoting socio-economic growth and sustainable business models.

Watch to learn how Eni is helping youth to develop agricultural knowledge and skills.

Iranians head to the polls on Friday to vote for president, and it appears a foregone conclusion that hardliner Ebrahim Raisi, the nation's top judge, will win.

Outsiders, and many Iranians, roll their eyes at the predictability of this vote. Iran's Guardian Council, a dozen clerics and judges who answer only to Supreme Leader Ali Khamenei, has cleared the field for Raisi by ruling all of his credible challengers ineligible. The fix is in, and Iranians are now preparing for a moment when anti-reform conservatives, those who oppose social change inside Iran and deeper engagement with the West, will for the first time ever control the country's presidency, parliament, courts, and much of the media.

But simmering beneath the cynicism and predictability of this event is a deepening anxiety over Iran's future as it enters a potentially momentous period in the Islamic Republic's 42-year history. The Supreme Leader, in power for 32 years, is now 82 years old. Very few people know the true state of his health. Even if he outlives Raisi's presidency, which could last four or eight years, preparations for a historic, uncertain, and potentially dangerous leadership transition will intensify soon.

More Show less

Jon Lieber, Managing Director of the United States for the Eurasia Group, shares updates on recent policy developments:

With the Supreme Court's recent decision, is the Affordable Care Act here to stay?

Yes, this was the Court's third ruling on the Affordable Care Act upholding its constitutionality. This challenge was brought by Republican attorneys general who argued that the repeal of the individual mandate tax undermined the court's previous justification for allowing the law to stand. They were unsuccessful, yet again. And the political salience of the Affordable Care Act has really diminished in the last several years, with Republicans moving on to fight other issues and the Court signaling very strongly they don't want to get involved in overturning this piece of legislation. The Affordable Care Act will be here at least until Congress wants to legislate on it again.

More Show less

Iranians head to the polls on June 18, in what's widely perceived to be a foregone outcome. Analysts predict that popular disillusionment with Iran's political class will make this one of the lowest turnout elections in Iran's post-revolution history. According to one poll taken by the Iranian Students Polling Agency, as few as 42 percent of the eligible voting population is expected to show up. We take a look at contemporary Iran's demographics, and how this year's vote turnout might compare to previous elections.

Latin America needs vaccines: The World Health Organization has called on the G7 countries that pledged to donate a billion COVID vaccine doses to the developing world to prioritize Latin America, with WHO officials pointing to the fact that out of the top 10 countries with the highest COVID death tolls per capita over the past week, nine are in Latin America, where many health systems are overstretched and vaccines are scarce. This call comes as Latin America's COVID death toll has surpassed 1 million. Cases and deaths are soaring in Argentina and Colombia, for instance, while Brazil has fully vaccinated just 11 percent of its population despite recording the world's second highest death toll. Even Chile, which has carried out Latin America's most successful vaccination campaign to date, has been forced to delay reopening due to a recent surge in infections among unvaccinated younger people. The WHO says prioritizing the region for vaccine donations makes sense in order to stop large sustained outbreaks that may spur potentially more infectious COVID variants that'll cross borders and wreak havoc in populous states. Most of the donated shots will be distributed through the COVAX facility, which is a problem for countries like Venezuela, shut out from COVAX because of payment problems.

More Show less

3: China has launched three astronauts into orbit in its first space mission since 2016. The astronauts will spend three months aboard the country's new space station, demonstrating China's resolve to become a space power following successful earlier missions to collect soil samples on the Moon and land a wheeled robot on Mars.

More Show less

In 2019, Ethiopia's fresh Prime Minister Abiy Ahmed accepted a Nobel Peace Prize for his role in brokering a peace treaty with neighbor and longtime foe Eritrea. At the time, Abiy was hailed by the Western media as a reformist who was steering Ethiopia, long dominated by ethnic strife and dictatorial rule, into a new democratic era.

But barely two years later, Abiy stands accused of overseeing a campaign of ethnic cleansing in the northern Tigray region, putting the country on the brink of civil war.

It's against this backdrop that Ethiopians will head to the polls on June 21 for a parliamentary election now regarded as a referendum on Abiy's leadership. But will the vote be free and fair, and will the outcome actually reflect the will of the people? Most analysts say the answer is a resounding "no" on both fronts.

More Show less

Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:

Cyber issues took center stage at the G7 summit. Is there a consensus among world leaders on how to handle cyberweapons?

Well, depending on who is included, there is a growing consensus that the escalations of conflict in cyberspace must stop. And G7 leaders that are now all representing democracies did call on Russia to hold perpetrators of cybercrime that operate from within its borders to account. So, I guess hope dies last because laws in Russia prevents the extradition of suspects to the US, even if Vladimir Putin answered positively when Joe Biden asked for cooperation on that front. And when it comes to limiting the spread of tools that are used for hacking, surveillance and infiltration, the EU has just moved ahead and adopted new dual use regulations which reflect the concerns for human rights violations when journalists are targeted the way that Jamal Khashoggi was. So ending the proliferation of systems that are used to attack would be an urgent but also obvious step for democratic nations to agree on.

More Show less

Subscribe to GZERO Media's newsletter, Signal

GZERO World Podcast


Subscribe to GZERO Media's newsletter: Signal

GZERO World Podcast


Subscribe to GZERO Media's newsletter: Signal