Connect with us

Published

on

Salvadoran President, Nayib Bukele speaks during an event in May 2021. El Salvador become the first country to adopt bitcoin as legal tender in June.

Camilo Freedman | SOPA Images | LightRocket | Getty Images

It has been more than a year since El Salvador made history by becoming the first country to make bitcoin legal tender, and so far, 37-year-old resident Edgardo Acevedo has found the nationwide crypto experiment to be relatively anticlimactic.

“I don’t think anything has changed, except that the country is more recognized than before, but the economic life of Salvadorans remains the same or worse than a few years ago,” said Acevedo, a development engineer working in the capital city of San Salvador.

Acevedo, who is also known by the pseudonym Ishi Kawa, tells CNBC that while bitcoin has become a topic of conversation, adoption remains low, and he has personally found that there are very few businesses that accept the world’s biggest cryptocurrency — and even fewer Salvadorans who wish to pay in the digital token.

“What has improved is the issue of violence and crime, but economically, I can say that nothing has changed,” he said.

It has been a rocky time, with the project not living up to the grand promises made by the country’s popular and outspoken president Nayib Bukele.

The use of bitcoin in El Salvador appears to be low, as the currency has lost about 60% of its value since the experiment started and the country still faces plummeting economic growth and a high deficit. El Salvador’s debt-to-GDP ratio — a key metric used to compare what a country owes with what it generates — is set to hit nearly 87% this year, stoking fears that the nation isn’t equipped to settle its loan obligations.

Data from Bloomberg Economics shows that El Salvador tops its ranking of emerging market countries that are vulnerable to a debt default. Even as it retires some of its outstanding debts, the country’s domestic and multilateral loan obligations pose a real threat, in part because the world’s biggest lenders aren’t too keen to give cash to a country betting its future on one of the most volatile assets on the planet.

Pair these economic woes with a renewed war on gang violence and the country is barreling toward uncertainty.

“The government claims the developments as a success, but most local commentators and international watchers are underwhelmed,” Rachel Ziemba, founder of Ziemba Insights, told CNBC.

El Salvador's new bitcoin wallet could totally disrupt the remittance process

Bitcoin uptake appears low

When El Salvador’s Bitcoin Law came into effect Sept. 7, 2021, Jaime Garcia was hopeful that it would fix a few big problems with the way that Salvadorans send, receive and spend money.

As part of the law, prices are now sometimes listed in bitcoin, tax contributions can be paid with the digital currency, and exchanges in bitcoin will not be subject to capital gains tax. But crucially, Bukele promoted the law as a way to expand financial inclusion — which is no small thing for a country where approximately 70% of the population does not have access to traditional financial services, according to the Bitcoin Law.

To help facilitate national adoption, El Salvador launched a virtual wallet called “chivo” (Salvadoran slang for “cool”) that offers no-fee transactions, allows for quick cross-border payments, and requires only a mobile phone plus an internet connection. It aimed to bring users onboard quickly, both to scale bitcoin adoption and to offer a convenient onramp for those who had never been a part of the banking system.

Bukele tweeted in January that about 60% of the population, or 4 million people, used the chivo app, and more Salvadorans have chivo wallets than traditional bank accounts, according to a Sept. 20 research note from Deutsche Bank. Still, only 64.6% of the country has access to a mobile phone with internet, that note says.

But a report published in April by the U.S. National Bureau of Economic Research showed that only 20% of those who downloaded the wallet continued to use it after spending the $30 bonus. The research was based upon a “nationally representative survey” involving 1,800 households.

Garcia, who lives in the Canadian province of Saskatchewan, fled El Salvador when he was 11 after rebels bombed his house, but he keeps in close touch with family and friends who stayed behind — and he sometimes sends money back home, too.

“There are pockets where bitcoin is popular, like in El Zonte, but it’s clear that adoption is not massive,” said Garcia.

“Big chains like McDonald’s, Starbucks, and most merchants at a mall will accept bitcoin — but are people using it? Not too much locally,” he said. “It’s mostly tourists using bitcoin.”

A survey by the El Salvador-based El Instituto de Opinion Publica, a public opinion think tank, found that 7 in 10 Salvadorans do not think the Bitcoin Law has benefited their family economy.

Another survey by the institute found that 76 out of 100 small and medium-size enterprises in El Salvador do not accept bitcoin payments.

“Bitcoin’s first year in effect has transcended from a commercial expectation to an irrelevant topic for traders,” said Laura Andrade, director of El Salvador’s Universidad Centroamericana, according to a CNBC translation of her Spanish-language comments.

Andrade said many large corporations are still advertising that they’re taking payments in bitcoin but are making excuses to not accept the cryptocurrency including saying their system does not work or the bitcoin wallet is out of service.

“The foregoing is evidence that this cryptocurrency, in reality, never had penetration in national commerce,” Andrade said.

“There seems to be evidence that most people used it primarily to get the free money from the government but have not used it on an ongoing basis given volatility and fees,” Ziemba said.

Meanwhile, those who did use the government’s crypto wallet reportedly had technical problems with the app. Other Salvadorans fell prey to schemes involving identity theft, in which hackers used their national ID number to open a chivo e-wallet, in order to claim the free $30 worth of bitcoin offered by the government as an incentive to join.

survey published in March by the Chamber of Commerce and Industry of El Salvador found that 86% of businesses have never made a sale in bitcoin, and only 20% of businesses take bitcoin, despite the Law’s mandate that all merchants accept the cryptocurrency.

“They gave people the wallets, they forced businesses to accept them, but essentially, in my opinion, it’s a big nothing burger,” said Frank Muci, a policy fellow at the London School of Economics, who has experience advising governments in Latin America. “Nobody really uses the app to pay in bitcoin. People that do use it, mostly use it for dollars.”

The experiment also involved building a nationwide infrastructure of bitcoin ATMs, but they’re too far away for many people to use.

Another hope for the chivo wallet was that it would help save hundreds of millions of dollars in remittance fees. Remittances, or money sent home by migrants, account for more than 20% of El Salvador’s gross domestic product, and some households receive over 60% of their income from this source alone. Incumbent services can charge 10% or more in fees for those international transfers, which can sometimes take days to arrive and require a physical pickup.

But in 2022, recent data shows that only 1.6% of remittances were sent to El Salvador via digital wallets. According to the Deutsche Bank report from September, part of the reason bitcoin transfers haven’t caught on has to do with the complications of buying and selling bitcoin for dollars. The report notes that “people who send and receive remittances frequently use informal brokers to convert local currency to and from bitcoin” and extremely volatile prices make buying and selling the cryptocurrency a complex task requiring technical know-how.

“This is a new money, a new way of doing things for a population that is very comfortable with dollars. This is a population that is largely unbanked and would rather deal with hard cash that they can see and feel,” Garcia said.

Miles Suter, the crypto product lead at Cash App, told CNBC on a panel at the Messari Mainnet conference in New York that the government’s 90-day rollout of the chivo wallet and nationwide adoption of bitcoin was “rushed” and that there are still a lot of problems.

“You shouldn’t mandate the acceptance of a specific currency,” said Suter, who spent six months in El Salvador in the runup to the passing of the Bitcoin Law. However, Suter added that the media perception is worse than how things are actually going on the ground.

“I saw and experienced lives being changed by having access to a new emerging monetary standard,” he said.

A look at El Salvador's crypto experiment after making bitcoin its national currency

‘Sleepwalking into a debt default’

Well before Bukele wagered that bitcoin would bandage over longstanding economic vulnerabilities, the country was in a lot of trouble.

The World Bank projects that the Salvadoran economy will grow by 2.9% this year and 1.9% in 2023, down from 10.7% in 2021. But that growth itself was a bounce-back from an 8.6% contraction in 2020.

Its debt-to-GDP ratio is almost 90%, and its debt is expensive at around 5% per year versus 1.5% in the U.S. The country also has a massive deficit — with no plans to reduce it, whether through tax hikes or by substantially cutting spending.

In a research note from JPMorgan, analysts warn that El Salvador’s eurobonds have entered “distressed territory” in the last year, and S&P Global data reportedly shows that the cost to insure against a sovereign debt default is hitting multiyear highs.

Both JPMorgan and the International Monetary Fund warn the country is on an unsustainable path, with gross financing needs set to surpass 15% of GDP from 2022 forward — and public debt on track to hit 96% of GDP by 2026 under current policies.

El Salvador faces a heavy mix of multilateral and domestic debts, including imminent debt repayment deadlines in the billions of dollars, such as an $800 million eurobond that matures in January.

“The domestic debt is very large, relatively short duration and needs to be rolled over frequently,” said Muci, who previously worked at the Growth Lab at the Harvard Kennedy School of Government.

El Salvador has been trying since early 2021 to secure a $1.3 billion loan from the IMF — an effort that appears to have soured over Bukele’s refusal to heed the organization’s advice to ditch bitcoin as legal tender.

Rating agencies, including Fitch, have knocked down El Salvador’s credit score, citing the uncertainty of the country’s financial future given the adoption of bitcoin as legal tender. That means that it’s now even more expensive for Bukele to borrow much-needed cash.

Beyond the fact that global lenders don’t want to throw money at a country that is spending millions in tax dollars on a cryptocurrency whose price is prone to extreme volatility, the IMF’s largest shareholder, the U.S., is targeting Salvadoran officials as part of wider international sanctions against “corrupt actors.”

The president’s efforts to consolidate power have also driven up this risk premium for global lenders.

Bukele’s New Ideas party has control over the country’s Legislative Assembly. In 2021, the new assembly came under fire after it ousted the attorney general and top judges. The move prompted the U.S. Agency for International Development to pull aid from El Salvador’s national police and a public information institute and reroute the funds to civil society groups.

Additionally, El Salvador can’t print cash to shore up its finances. El Salvador ditched its local currency, the colon, in favor of the U.S. dollar. Only the Federal Reserve can print more dollars. Meanwhile, its other national currency, bitcoin, is revered for the fact that it, too, is impossible to mint out of thin air.

“One of the big issues has been the fact that the bitcoin gimmick has distracted from the fiscal and economic challenges of the country and made it more difficult for the country to access IFI lending and preferential terms,” Ziemba said.

Ziemba added that there have been some swaps with major crypto firms that allowed the country to raise cash to pay off the debt due this year, and perhaps early next year, but the long-term debt sustainability remains a challenge.

“They’ve spooked the bejesus out of financial markets and the IMF,” said Muci, who tells CNBC that nobody wants to lend money to Bukele unless it’s at “eye-gouging rates” of 20% to 25%.

“The country is sleepwalking into a debt default,” Muci said.

El Salvador is using volcano power to mine bitcoin

Tourism and presidential popularity solid

On the day the Bitcoin Law took effect, Bukele revealed that the country had begun to add bitcoin to government coffers. Since then, the price of the cryptocurrency has plunged more than 60%, stoked by rising interest rates and failed projects and bankruptcies in the industry.

The government has an unrealized paper loss on bitcoin of around $60 million. None of these losses are locked in until the country exits its bitcoin position.

In aggregate, the entire experiment and all its associated costs have only set the government back around $375 million, according to estimates. That’s not nothing — especially considering the fact that El Salvador has $7.7 billion of bonds outstanding — but to an economy of $29 billion, it is comparatively small.

El Salvador’s millennial, tech-savvy president — who once touted himself as the “world’s coolest dictator” on his Twitter bio — has tethered his political fate to the country’s crypto gamble, so he has a very big incentive to make it work in the long run and to pay off the country’s debt in the interim. Bukele faces reelection for another five-year presidential term in 2024.

At least El Salvador’s big bitcoin gamble has been a win in terms of attracting bitcoin tourists.

The tourism industry is up 30% since the Bitcoin Law took effect, according to official government estimates. The country’s tourism minister also notes that 60% of tourists now come from the U.S.

The bitcoin experiment hasn’t hurt the president’s popularity either. Bukele’s approval ratings are north of 85% — thanks in large part to his tough-on-crime approach to leading. That’s no small thing to a country that was more dangerous per capita than Afghanistan five years ago.

Suter said the project has also introduced many locals to the concept of savings, noting that before the Bitcoin Law, much of the population didn’t have a way to digitally hold their money and transact among one another.

“It was all cash — and the cash that you earned that week, you typically spent it, because there wasn’t much ability to dream of growing it through investment.”

How bitcoin's mining activity could point to a bottom for the cryptocurrency

The president upped the ante in November when he announced plans to build a “Bitcoin City” next door to the Conchagua volcano in southeastern El Salvador. The bitcoin-funded city would offer significant tax relief, and geothermal energy rolling off the adjacent volcano would power bitcoin miners.

But now, Bitcoin City is on hold, as is the $1 billion bitcoin bond sale, which was initially put on ice in March because of unfavorable market conditions.

“Ultimately, El Salvador’s problems are just tangential to currency,” Muci said.

“The plane is gonna crash eventually, if they don’t change things,” he said — “if they don’t raise taxes, cut spending, start being much more disciplined, convincing markets that they’re sustainable.”

“Bitcoin doesn’t solve any of El Salvador’s important economic problems,” he added.

Bitcoin falls below $19,000 as Ethereum upgrade kicks into full gear

Continue Reading

Environment

Ørsted’s largest solar farm in the world is now online in Texas

Published

on

By

Ørsted's largest solar farm in the world is now online in Texas

The Mockingbird Solar Center, Ørsted’s largest solar project globally, is now online, next to protected prairie donated by the renewable energy giant.

This massive 468-megawatt (MW) solar farm is set to power 80,000 homes and businesses, providing a major boost to the Texas grid.

But the launch of Mockingbird Solar isn’t just about clean energy – it’s also about restoring precious ecosystems. Ørsted has donated 953 acres of the Smiley-Woodfin Native Prairie Grassland, which sits next to the solar center, to The Nature Conservancy. The donated land is now the Smiley Meadow Preserve, a protected area for tallgrass prairie that’s home to more than 400 species of grasses and wildflowers.

Tallgrass prairies are some of the rarest ecosystems in the US, with less than 1% of Texas’ original tallgrass prairies still in existence. Tallgrass prairie does a lot of heavy lifting for the environment, including storing carbon, preventing floods, and providing crucial habitats for pollinators.

“Native prairies are the rarest landscapes left in Texas – so much so that many people have never seen one,” said David Bezanson, land protection strategy program director for The Nature Conservancy in Texas. He added that preserving Smiley Meadow will not only conserve one of the best prairie remnants left but also help restore other prairie habitats and boost regional biodiversity.

The Mockingbird Solar Center, a half-billion-dollar project, is part of Ørsted’s $20 billion push to expand renewable energy production across the US. Beyond generating electricity, it will inject $75 million into local property taxes, benefiting schools and other public services. The project also created over 550 construction jobs and will continue to be supported by operations staff moving forward.

Ørsted worked with US companies, including First Solar, for solar panels and partnered with local businesses like Drake Construction and Pfifer Farms for construction materials. It also gave more than $50,000 to local volunteer fire departments in Roxton and Brookston.

With Mockingbird Solar now up and running, Ørsted has more than 6 gigawatts of onshore wind, solar, and battery storage projects either in operation or being built across the US.

Read more: Ørsted got a huge Tesla battery storage system for the world’s single-largest offshore wind farm


If you live in an area that has frequent natural disaster events, and are interested in making your home more resilient to power outages, consider going solar and adding a battery storage system. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. They have hundreds of pre-vetted solar installers competing for your business, ensuring you get high quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use and you won’t get sales calls until you select an installer and share your phone number with them.

Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisers to help you every step of the way. Get started here. –trusted affiliate link*

FTC: We use income earning auto affiliate links. More.

Continue Reading

Environment

Cramer names oil and natural gas stocks set to do well under Trump

Published

on

By

Cramer names oil and natural gas stocks set to do well under Trump

CNBC’s Jim Cramer on Friday said companies related to natural gas and oil will thrive under President-elect Donald Trump’s administration and a majority Republican Congress.

“We’re hearing about all sorts of Trump trades right now, and many of these things have made insane moves in less than three weeks, to the point where, actually, they’re feeling precarious to me,” he said. “If you want a sustainable Trump trade, I say bet on the natural gas ecosystem. This is an industry that already had a lot going for it, it just needed some cooperation from the federal government, which it is about to get.”

President Joe Biden’s administration is largely opposed to fossil fuels, Cramer said, and the federal government has worked to block pipelines and paused new liquified gas export authorizations. This dynamic, coupled with a weaker global economy, caused the sector to underperform for much of the year, he suggested. But Trump has shown more favor to the industry, and Cramer pointed out that he tapped prominent oil executive Chris Wright to lead the Department of Energy.

Cramer recommended several stocks in the sector, including energy producers EQT and Coterra. The former is focused on natural gas and recently acquired peer Equitrans, raising the combined company’s valuation to an estimated $35 billion, Cramer noted. He added that Coterra is a good long-term holding and called the company “one of the shrewdest operators in the industry.”

He highlighted pipeline companies, including Energy Transfer and Kinder Morgan, and said he was especially bullish on Enbridge. Enbridge says it transports about 20% of all natural gas consumed in the U.S., and Cramer claimed the Canadian outfit has “strategically located assets.” He also named Cheniere and Sempra, saying the former is the “best playfor liquified natural gas exports.

“Seasonally, this is a good time for the commodity,” he said, pointing out that natural gas itself has climbed since the election. “But I also think there’s some optimism about the future of the industry driving this move.”

Jim Cramer’s Guide to Investing

Continue Reading

Environment

Jeep launches Wagoneer S EV lease prices starting at just $599 per month

Published

on

By

Jeep launches Wagoneer S EV lease prices starting at just 9 per month

Jeep’s first global luxury electric SUV will arrive at US dealerships any day. Despite its $72,000 price tag, lease prices for the 2024 Jeep Wagoneer S EV start at just $599 per month.

2024 Jeep Wagoneer S EV lease prices

After unveiling its first global electric SUV, Jeep’s CEO said the Wagoneer S “marks a new chapter” in its storied history.

Jeep claims the Wagoneer S packs “exhilarating performance.” With 600 hp and 617 lb-ft of torque, the big-body SUV can sprint from 0 to 60 mph in just 3.4 seconds. Its 100 kWh battery pack also gives it a driving range of over 300 miles.

The electric SUV is unmistakably still a Jeep, but it did get several upgrades to distinguish it as an EV. The grille is now enclosed without the need to cool a massive engine, giving it a sporty, more modern look.

Jeep revamped its design with a new illuminated seven-slot grille with ambient cast lightning. It also fine-tuned its profile, adding flush door handles, a rear wing, and integrated fins for better airflow.

Jeep-Wagoneer-S-EV-lease-prices
Jeep Wagoneer S Launch Edition (Source: Jeep)

The first Jeep Wagoneer S Launch Edition models get exclusive dark accent design elements like 20″ Gloss Black Wheels.

Inside, the electric SUV is loaded with the latest tech and connectivity, including a best-in-class 45″ of usable screen space. The setup includes a 12.3″ center screen and an exclusive 10.25″ interactive front passenger screen.

Jeep-Wagoneer-S-EV-lease-prices
Jeep Wagoneer S Launch Edition Radar Red interior (Source: Jeep)

Jeep already announced that the 2024 Wagoneer S EV will start at $71,995, but now the company has revealed lease prices for the first time.

According to Jeep, the 2024 Jeep Wagoneer S Launch Edition can be leased for $599 per month for 36 months (10,000 miles per year). The deal includes $4,999 due at signing and a $7,500 EV incentive. However, you may want to act fast, as Jeep’s offer is only good until December 2, 2024.

Jeep Wagoneer S vs Tesla Model Y Starting Price Range Lease Price
Jeep Wagoneer S Launch Edition $71,995 +300 miles $599/mo
Tesla Model Y RWD $44,990 320 miles $299/mo
Tesla Model Y AWD $47,990 308 miles $399/mo
Tesla Model Y AWD Performance $51,490 279 miles $599/mo

In comparison, Tesla Model Y RWD lease prices start at $299 for 36 months with $2,999 down (10,000 miles). The Performance AWD model starts at $599 per month. In an end-of-year promo, Tesla also offers 3 months of free Supercharging and Full Self-Driving.

Ready to drive off in your new electric SUV? We can help you get started. You can use our links below to view offers on the Jeep Wagoneer S and Tesla Model Y at a dealer near you.

FTC: We use income earning auto affiliate links. More.

Continue Reading

Trending