El Salvador will be the first country to accept Bitcoin as legal currency this week. This controversial move was pushed by Nayib Bukele, the country’s young and headstrong president.
However, the rollout cryptocurrency in Central America has been hampered by a greater concern: a series if vehement attacks by Bukele’s ruling party on El Salvador’s three-decade-old democracy.
Recent days have seen Bukele loyalists at the Supreme Court openly allow him to run for reelection in 2024 despite the constitutional ban on successive presidential terms.
His supporters in the Assembly passed legislation to remove one third of the nation’s judges & prosecutors. This apparent response to Bukele’s public calls to ‘purge’ the judiciary branch.
International and local critics decry these actions as part a larger power grab that began in May when Bukele’s party broke the constitution by removing the attorney general and several Supreme Court members.
Bukele, 40 years old, has been described as a visionary by Bitcoin supporters around the globe. However, he is also being viewed as an international pariah.
On Sunday, small protests took place in San Salvador. A U.S. State Department spokesperson Ned Price stated that El Salvador’s ‘decline of democratic governance damages the United States’ relationship with El Salvador and further undermines El Salvador’s international reputation as a democratic partner in the region.
Jean Manes, America’s top official in El Salvador, said Saturday that the nation was a democracy in decline. He also compared Bukele with Hugo Chavez, the late Venezuelan leader who, like other Latin American autocrats, used his popularity to hide a systematic devaluation of democratic checks.
Similar to Bukele, who has a 90% approval rating, Chavez enjoyed broad voter support when it came time to stack the courts in his favor, and push a constitutional amendment that eliminated presidential term limits. As the country spiraled toward economic ruin, he tightened his grip on power and jailed critics.
“For a moment, many Venezuelans believed they were living in democracy… but little-by-little Chavez undermined independence of Venezuela’s democratic institutions,” said Manes (the charge d’affaires at U.S Embassy in San Salvador). “We know the path and we don’t want it for El Salvador.
Bukele, a charismatic ex-marketing executive, used his social media skills to win election in 2019. His campaign fed anger at the economic inequality and corruption that have dominated El Salvador for many decades.
He repeatedly stated that drastic changes were necessary to improve the life in El Salvador. He called the 1992 peace accord that ended El Salvador’s civil war and established its representative democracy, a ‘farce’.
During a recent speech to Congress, he stated that democracy was a “pantomime” and accused the politicians who came before him of only being concerned with their own self-enrichment. “When changes aren’t cosmetic, you must address the root causes of the problem.”
Manuel Melendez Sanchez, a Harvard University PhD candidate for political science, stated that Bukele’s critiques of the past resonate strongly with many Salvadorans. Melendez Sanchez was born in El Salvador and is currently pursuing a Harvard University PhD in political science.
He stated that while the diagnosis of problems was not necessarily incorrect, throwing away democratic institutions isn’t the answer and will never be the solution.
Others have speculated about Bukele’s power grabs just days before El Salvador adopts Bitcoin. He stated that there is a strong sense that the timing of the Bitcoin rollout has been used to distract attention.
The Bitcoin plan is not popular when compared to other Bukele initiatives. These include expanding the size and distribution of food donations in the worst days of the COVID-19 pandemic.
According to a University of Central America survey, 56% of Salvadorans don’t trust Bitcoin. 71% of them say they won’t use it.
Bukele introduced a bill to Congress in June. It was written by an American CEO of a bitcoin cash application. The law states that businesses must accept digital currency for goods or services by Sept. 7. The law makes the U.S. Dollar the country’s official currency.
Bukele stated that the plan will empower Salvadorans who don’t have bank accounts. It will also give them digital transactions, which will make it cheaper than Western Union for people who send remittances to the U.S.
However, critics warn that bitcoin’s extreme volatility could cause El Salvador’s economy to collapse overnight and bankrupt communities already some of the most poor in the hemisphere.
There is also the possibility that illegal activity could result. According to the Central American Institute for Fiscal Studies, this plan will make El Salvador a “money laundering paradise.”
The new law allows customers to use a variety of apps for small bitcoin transactions to pay for everything – including soda and federal taxes. Bukele claims that the law created a $150 million government trust fund, which will allow Salvadorans to convert their bitcoin into dollars if they so desire.
Bukele has been launching a social media campaign against anyone who criticizes his Bitcoin plan in recent weeks. Mario Gomez was a prominent critic of Bukele’s Bitcoin plan and was held by police for four hours without explanation.
Two foreign journalists working with El Faro in Salvador were also expelled by the government. El Faro has been conducting several investigations into Bukele including one that revealed that his government offered perks to the nation’s gangs in return for them reducing violence. Bukele’s government launched money laundering investigations against El Faro, as well as several media outlets he claims have attacked him.
Ruth Lopez, an attorney and head of the anti-corruption unit at Cristosal (a human rights organisation), said that such moves make dissidents nervous.
Lopez stated that Lopez’s government policy was to create fear.