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Bukele’s Big Bitcoin Gamble Worsens El Salvador Debt Woes

El Salvador’s dollar debt is the worst-performing in Latin America this year as it struggles to secure new financing through a stalled Bitcoin-linked bond

Signs of unfulfilled campaign promises during a protest ahead of a state of the union address by Nayib Bukele.
By Sydney Maki
June 15, 2022 | 10:04 am

Bloomberg — An epic rout that has wiped out about two-thirds of Bitcoin’s (BTC) value is exacerbating the debt crisis in the world’s most crypto-friendly country.

In the year since El Salvador approved Bitcoin as legal tender, the nation has lost almost $56 million by gambling on the digital asset, according to calculations by Bloomberg. That may not sound like much, but for a financially troubled country like El Salvador, every bit counts.

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The losses now represent more than half of what President Nayib Bukele’s government spent to buy the 2,301 Bitcoin disclosed through announcements on Twitter. The crypto currency was tumbling for a ninth straight session on Wednesday, on pace for its longest losing streak since 2014. Still, the extent of the decline doesn’t seem to have cowed Bukele, who hinted in a Tweet on Tuesday that it may represent a buying opportunity.

Based on the president’s tweets, the nation last purchased 500 Bitcoin a little more than a month ago.

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It highlights an important risk for investors in the cash-strapped Central American nation’s debt, which has been dragged lower by concerns surrounding wide fiscal deficits and an $800 million bond coming due in January. El Salvador’s dollar debt is the worst-performing in Latin America this year as it struggles to secure new financing through a stalled Bitcoin-linked bond.

Concern over the nation’s ability to get the funding it needs to roll over looming debts pushed S&P Global Ratings to downgrade the nation to CCC+ this month, a move that put it on par with Ukraine and Argentina.