Cryptocurrency in El Salvador

In an article in the investment magazine Moneyweek, Dominic Frisby observes that El Salvador has become the first internationally recognised nation to adopt a cryptocurrency as legal tender. However, he also explains that this does not mean every shop or merchant in the country must now accept bitcoin as payment. Rather, its citizens could now pay their taxes in bitcoin, and, crucially, bitcoin gains will not be subject to capital gains tax.

The author’s view is that this is a “bullish move” for the country and for bitcoin. He sets out several potential benefits to El Salvador from the move, including:

  • Financial inclusion: about 70% of Salvadorans do not have bank accounts, but far more have smartphones.
  • Lower fees for remittances entering the country, which means more money entering the country.
  • Wages can be paid, and employees can store their wealth, in a currency that is not subject to US monetary policy.
  • A rise in tourism from bitcoin-community visitors.
  • Increased investment due to favourable legislation.
  • Development in the country’s digital economy.

Frisby also believes the move is “good news” for bitcoin as, if it proves successful, many other countries in Central and South America could follow suit.

However, Frisby tempers his enthusiasm by warning “success won’t happen overnight”. He argues that institutions such as the World Bank, the International Monetary Fund and the financial establishment generally, as well as the “nocoiner press” will be looking for the move to fail. But he ends on a hopeful note, contending that bitcoin will eventually give El Salvador and its people “extraordinary economic freedom”.

Read the full article: Dominic Frisby, ‘El Salvador could be the shape of things to come for bitcoin—and emerging nations’, MoneyWeek, 7 September 2021

Elections in Peru

The most recent elections in Peru, held on 6 June 2021, took six weeks to conclude. Ultimately, Pedro Castillo, a teacher and farmer, won with 50.12% of the vote. He defeated Keiko Fujimori, daughter of “Peru’s last dictator” Alberto Fujimori, who received 49.87% of the vote.

In a commentary piece for the Washington Office on Latin America (WOLA), Jo-Marie Burt considers the build-up and fall-out of the election with a focus on the role of Keiko Fujimori. Since publication, charges including of money laundering, leading a criminal organisation, and obstruction of justice have been brought against Fujimori. These relate to her prior presidential runs, with prosecutors seeking a sentence of over 30 years.

Burt summarises Fujimori’s actions during the campaign as peddling a “narrative of fraud […] laced with racist invectives and plenty of redbaiting”. She explains that Fujimori has said the election was “stolen” and has made several claims of fraud during the vote count, particularly over tens of thousands of votes for her opponent in rural areas. Each claim was considered by the country’s election board and “virtually all” were rejected. The article notes that many parallels have been drawn between Fujimori’s claims and those of Donald Trump during the 2020 US presidential election.

The author goes on to detail Fujimori’s history in Peruvian politics, including her two earlier defeats as a presidential candidate, to explore how she has wielded significant power over the direction of the country despite not holding the presidency. Burt ends the article by reflecting how little is known about Castillo. She predicts that “more turbulent times” lie ahead for Peru.

Read the full article: Jo-Marie Burt, ‘Peru has a new president, but Fujimori’s election lie imperils democracy’, Washington Office on Latin America (WOLA), 20 July 2021