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They're investing FX reserves in Bitcoin. Their imports are not priced in Bitcoin. Bitcoin going down relative to the currencies they import in hurts El Salvador's ability to finance them. Which raises borrowing costs [1]. Which leads to exporters demanding earlier payment [2].

San Salvador has less than three months' imports in reserves [3][4][5]. Their Bitcoin experiment has scared off crisis lenders [6]. There is no good ending for them right now.

[1] https://www.reuters.com/markets/europe/crypto-crash-leaves-e...

[2] https://fred.stlouisfed.org/series/SLVBCAGDPBP6

[3] https://tradingeconomics.com/el-salvador/imports

[4] https://tradingeconomics.com/el-salvador/foreign-exchange-re...

[5] https://data.worldbank.org/indicator/BN.CAB.XOKA.CD?location...

[6] https://www.imf.org/en/News/Articles/2022/02/15/cf-el-salvad...



Thanks for the sources to read further in the topic! I was always curious to know how their “experiment” was going to turn out and it seems like the results so far aren’t good


> was always curious to know how their “experiment” was going to turn out and it seems like the results so far aren’t good

They were in a bad position to start with. There was no happy ending even if they'd done everything right.

But had they spent the boom years borrowing cheaply where possible, renegotiating and paying off expensive debt where necessary, moderating fiscal expansion and fighting violence around their tourist centers, they would have had better options. Instead, they voted in a magician.

San Salvador is between a rock (currency crisis prompting food and fuel shortages) and a hard place (austerity and an IMF loan).


Minor note: it's El Salvador (The Savior), not San Salvador (Holy/Saint Savior).


https://en.m.wikipedia.org/wiki/Metonymy

San Salvador is the capital, like saying Moscow to refer to Russia.


Thanks! I was trying to remember the term.


El Salvador is the country, "San Salvador" is standing in for "The Government of El Salvador". Or the leadership, executive, etc.

Like when news articles say, "U.S. trade deficits are widening. Washington appears to be pursuing domestic development efforts rather than the protectionist measures floated by many".


it's been 100% an utter disaster




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