Front Burner - Front Burner Introduces: Nothing is Foreign

Episode Date: February 12, 2022

World news, local voices. Nothing is Foreign is a weekly trip to where the story is unfolding. Hosted by Tamara Khandaker. This episode takes you inside El Salvador to hear from locals to see how the promise of a cryptocurrency paradise by a self-professed 'world's coolest dictator' is running up against the reality of regular people just trying to survive. More episodes are available at: http://hyperurl.co/nothingisforeign

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi everybody, a special bonus for FrontBurner's podcast subscribers today, the first episode of a brand new weekly podcast that knows there's no such thing as foreign. It just depends on your point of view. Nothing is Foreign from CBC Podcasts is world news for people craving stories from elsewhere

and for people who want the view from the ground, not from above. Immersive, immediate, real host Tamara Kondaker invites listeners to take a trip each week to see the world from a different perspective. We have the first episode for you right now. Please have a listen. So it's just not a good, a good, a cool, a nice idea. It's the evolution of humankind. This is Naib Bukele, the president of El Salvador. He's 40 years old, and he's not your typical world leader. You'll often see him rocking a backwards ball cap and a leather jacket. He gets into fights on Twitter. He stopped in the middle of a speech at the UN to take a selfie.

He's called himself the world's coolest dictator. Now, his Twitter bio says, CEO of El Salvador. Last summer, he made a move that shocked the world. He announced that El Salvador was going to be the first country to adopt Bitcoin as official currency. Let's all be part of it. And let's all push the future even forward. He's promising to build a Bitcoin city. And it's going to include everything, residential areas, commercial areas, services.

This is a fully, fully ecological city that works and it's energized by a volcano. The country already has a Bitcoin beach. Okay, I'm now about to buy a coconut from a little beach store with a Bitcoin. Not a Bitcoin, that'd be an expensive coconut, but with Bitcoin. And Bukele says he's bought Bitcoin while sitting naked on his phone, using tax dollars. He promises this Bitcoin play is going to help the country's working class, but critics say that's not happening. And his experiment is flirting with disaster. That's because a $1.3 billion loan from the International Monetary Fund is hanging in the balance. Right now,

the IMF is threatening to hold that money hostage if Bukele doesn't play ball and drop Bitcoin as legal tender. I'm Tamara Kendacker, and you're listening to Nothing is Foreign. On this episode, we're taking you to El Salvador to tell you about the world's first tech bro president, the true cost of his experiment with Bitcoin and how it's leaving regular people behind. So on the first weekend of June last year, hundreds of crypto fans descended on Miami for Bitcoin 2021. hundreds of crypto fans descended on Miami for Bitcoin 2021. We're all in a moment in history, in the center of this whole thing that's transforming the world into a digital world. This Bitcoin conference called itself the largest in the history of the planet. It looked and sounded like a massive party.

There was a packed bar, a raffle for a Lamborghini, and quite a few speeches that sounded kind of unhinged. It's a small step for Bitcoin and a giant leap for humanity. We die on this hill. I will fucking die on this fucking hill. You get the vibe. There was also a surprise appearance from none other than Nayib Bukele. My name is Nayib Bukele. My name is Naib Bukele and I'm president of El Salvador. He's speaking in a pre-recorded video address.

This is the moment he announces Bitcoin will become legal tender in El Salvador. That is why next week I will send to Congress a bill that will make Bitcoin a legal tender in El Salvador. He sells this idea as something that will help the average person with their finances. This will generate jobs and help provide financial inclusion to thousands outside the formal economy. But it's now been five months since the law came into effect. And by most accounts, it hasn't actually helped regular people much at all. It's very surreal. So this happens on a Saturday in English to an English audience, which is not the language that we speak.

We are a country that our only official language so far is Spanish. And maybe they will change that also. Nelson Rauda is an investigative journalist for a news site called El Faro. And to him, like so many others in El Salvador, this came out of nowhere. El Salvador is a developing country. It's the smallest and most densely populated in Central America. About half of its people live in the countryside, and many of them don't have electricity or running water.

70% of them don't even have bank accounts. Up until now, the country's only currency has been the U.S. dollar. We found out that our monetary system was changing, that we were not just using dollars, that we would also be using this magic internet money that is called Bitcoin. who will be using this magic internet money that is called Bitcoin. The way that I wrote this for the paper was that it took less than a soccer match to discuss and to approve this law that would essentially change the monetary system for 6 million people. It was only discussed, I say that in quotes,

but discussed during 85 minutes in the financial commission of the legislative assembly. It's a really short law. If you have seen it, it's no longer than two pages in Spanish, less than 15 articles. And what it says is that it states that Bitcoin is legal tender in El Salvador and forces everybody to accept it. Basically, every business and every person who makes transactions on the cell phone has to take Bitcoin as a legal tender. It has not been enforced as such. I mean, there has never been any fines or the police involvement

with people not accepting Bitcoin because this brought a lot of backlash to the government. They're going to spend $200 million on this? All right, so have you sorted out the rest of our problems? Have you sorted out education or health care? Well, there's a lot more problems to solve after that, before you come and impose a law that Salvadorans don't agree with. before you come and impose a law that Salvadorans don't agree with.

So although this law isn't really being enforced, the Bukele government is going out of its way to tie El Salvador's economy to Bitcoin by making the country a haven for Bitcoin investors. They got rid of a proof of COVID vaccination requirement for people coming into the country in November, just as there were Bitcoin conferences underway. They're planning to issue a billion dollar Bitcoin bond as a way to pay for the Bitcoin city that I mentioned earlier. Half of the money from the Bitcoin bond would go towards building its infrastructure, while the rest would go towards buying more Bitcoin that El Salvador hopes to make a profit from. The Bitcoin law was only the start.

Yeah, I think haven is a word. I believe they have even used paradise in the propaganda. Wow. It's like this whole idea, come to El Salvador, pay in crypto, surf in our beaches, do tourism, participate in Mayan ceremonies. I would say that it's more about alluring foreigners that are interested in Bitcoin than it is to get Salvadorans involved in Bitcoin. And what was the reaction from the public to this announcement? What were you sort of hearing from people on the ground?

Well, what I was hearing from people on the ground and what also the major polls revealed is that people rejected it. I went that weekend to a rural area en El Salvador, Morazán, a cuatro horas de la capital. Hablé con un hombre en una tienda de comercio y le dije a él, ¿qué sabes de este nuevo dinero, de esta nueva moneda? Y desde el principio dijo, lo único thing I know is that it's volatile. It's a money that has one price today and another price tomorrow. And I don't like that.

And it's not good for me as a business. This is also why economists in the country have been critical of Bukele's plan. Bitcoin's value is extremely volatile. It's dropped around 40% since its peak value in November. That kind of wild swing is something this grocery store owner understood immediately as dangerous. But that's not the only reason why people were concerned. Nelson also talked to the grocery store owner's daughter. And she said, well, if it's a money that's only digital and you have to use a cell phone for it,

this is really an area surrounded by mountains. So if you don't have data and you don't have signal, then it means you cannot make transactions. That's not very convenient. On top of all of that, a lot of people just don't understand the concept of Bitcoin. People we talked to on the streets of El Salvador said they found it hard to wrap their heads around. Well, someday it has to have these benefits. But one, I don't understand it.

Two, for me, it feels too complicated. And three, it's a trust issue. I don't trust it very much. Ana Paz is a 25-year-old cosmetologist living in San Salvador. doesn't really affect me, but it does affect others, especially our elderly, because they don't know how to navigate through technology that is now very advanced like we do. Speaking about the elderly, I also feel that it affects them a lot because they don't understand what the application is for.

And to explain that to them, you'd have to have a lot of patience to help them. And then the polls revealed that people rejected and people still rejected. The latest polls in December say that still that like 60 or 70 percent of salvadorans don't trust Bitcoin and wouldn't have their money, their salaries paid on Bitcoin. So based on those polls, people obviously still have a lot of fears around Bitcoin. So based on those polls, people obviously still have a lot of fears around Bitcoin. And it hasn't helped that since the law came into effect, a whole host of other issues have popped up, starting with the digital wallet the government built to hold people's money, called Chivo, which is slang for cool in El Salvador.

The launch was terrible. The launch was terrible in the sense that it had a lot of technical difficulties that it had to solve. Nelson's not exaggerating. The launch was a huge mess. Transactions weren't going through. Customer phone lines were jammed. ATM machines ran out of cash.

President Nayib Bukele himself went on Twitter to give customer service. This is very much his brainchild. Every new Chivo account was supposed to start with a $30 credit. But there were also issues with Chivo's ID verification system. So a lot of people who signed up in hopes of getting the $30 credit found that someone else had already signed into their account and used it. Like Pedro Hernandez, he's been out of work for a while and he's been making money by selling coconuts on the streets of San Salvador.

The one from the government, Chivo Wallet, I think it is, I got the $30 deposited, but I had bad luck. When I went to take them out, somebody had already taken them out. I don't know who. They have made people kind of afraid or unwilling to experiment. There's a lot of cases of identity theft online, even just alone theft online. The amount of cybercrime has increased in El Salvador since last year. And there's a lot of risk associated with it.

I don't have a cheaper wallet and I haven't used Bitcoin. This is on a pause again. Why? Because I feel that either way, its money has been taken from us, the working class, either from taxes or some other firm. Either way, I'm not interested in getting one. I have practically only heard complaints.

The first complaint would be that sometimes the number drops, and I don't find it logical. This was supposed to integrate, and this was supposed to try and make every transaction electronic. It's not working. The majority of people are not using it on their daily lives. It's not changing the lives of the majority of people. I mean, have you used your Chivo wallet at all?

I cannot use my Chivo wallet because my identity, my ID document, someone else used the number to cash in the $30 bonus. Wow. And this has happened to a lot of people. And we've had a lot of this, like this, you know, totally disconnected from the reality crypto bros who say, hey, you don't have to use Bitcoin for daily expense. You just have to save a little money.

You're really ignoring the reality that people don't have enough to save a little money every month. They only make and smith barely. to save a little money every month. They only make and smith barely. So if the people Bukele promised to help with this Bitcoin experiment say it's a bust, it makes you wonder, why did he think it was a good idea in the first place?

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people, and I have some startling numbers to share with you.

Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. I mean, you have to understand a little bit of the political context in El Salvador.

Bukele is probably the most popular president in recent history, at least in the last 30 to 40 years. There's no one who has been as popular as him. And yet this measure was his first unpopular measure. Yeah, it's really interesting that this was his first unpopular move. What's your understanding of why Bukele decided to do this? So there's two parts to that answer, which is like really the million dollar question that everybody asks. What he said, in the truth, I think, what he said is that it would greatly diminish the fees in remittances. Since from abroad, we are a country with 6 million people and 3 million approximately live in the United States.

El Salvador relies heavily on remittances, people from abroad sending money back home. Remittances make up about a fifth of the country's GDP. He also said that it would facilitate financial inclusion for a country in which roughly 70% of people don't have a bank account. The majority of transactions in El Salvador are done in cash, in U.S. dollars. So that's why Bukele said he wanted to introduce Bitcoin.

But Nelson says the timing of when this law was introduced is also worth paying attention to. It was just one month after what many experts were calling a technical coup d'etat, where Bukele made a series of moves that have been described as authoritarian. He took control of the constitutional court and the attorney general. He demoted the people who were in there illegally,

and then he illegally replaced them, not following the legal procedures to do so. That was causing a lot of headlines, negative headlines for him in the international press. In El Salvador, at least some people are worried, angry, and showing it on the streets. Last week, a long term. So all of a sudden those headlines started to change because now it's not the president who

gave a technical coup d'etat or the authoritarian who controls all three branches of the government, but the crypto visionary who is saving this terrible country with this Internet money. And the other thing, which is really, I think, in the core of the Bitcoin law, is the possibility or what the Bukele regime is trying to fund the country without the IMF and without the U.S. government. He wants to try to get rid of it. And he wants to look for another way to fund the country, to pay the debt, to not lead the country onto default.

So he turns to Bitcoin as a way of solving the country's debt so that the IMF and the U.S. don't have to be involved. Correct. Despite all the backlash to the Bitcoin plan, most of the people we talked to in El Salvador are still really fond of Bukele. His approval ratings are between 80 and 90 percent. fond of Bukele. His approval ratings are between 80 and 90 percent. Our president is well advised. He didn't just implement Bitcoin because he likes it. He is trending all around the world. That's a fact. Rudy McCall is a Mexican street food vendor in San Salvador. His wife also chimes in.

I'd say that at the beginning, people were a little afraid of using it. But coming from President Bukele, believe me, everything he does, you can trust. Everything he touches, the confidence he inspires to us Salvadorians, we can believe. Because he has vision, he sees into the future of everything.

I think his popularity, a huge part of it is based on the hatred that the Salvadoran population has against the establishment parties, like the traditional right wing and left wing, which governed the country for decades. And he has really expert to to expose them and and and and to say they are the bad ones i am the good one and then he has uh i think for the outsider especially an undoubtable charisma i mean it it has no effect on me uh now but he has a charisma and a persona to portray himself as cool, as visionary, as modern. But when you take down all these layers of coolness and emojis and shades, you really have a classic authoritarian. A classic authoritarian who loves the army, who controls the police, who hates the press, and who has really a messiah kind of attitude. If you're not with me, you're against me.

And if you don't praise me, you're my enemy. So it's really the classic Latin American dictatorship way, but dressed up in a Web 3, you know, 2.0. Yeah, yeah, yeah. It's like tech bro vibes, right? Exactly. But I've also seen that he's been tweeting about how he's been trading public funds on his phone naked or something like that.

So the only proof that you have for El Salvador's alleged purchase of bitcoins is the president's tweets. We have never seen a receipt for it. We have never seen an account. If this was public information, which it should be because it's public funds, we could answer. we could answer. So as of mid-January, El Salvador had bought 1,391 Bitcoin, according to a tweet from Bukele.

At that time, that would have cost around $71 million. Assuming this is true and they've held on to those Bitcoin, as of today, they would have lost around $8 million in value. But did Bukele really buy those coins that he said, or did he just Twitter it in an effort to up the price because of what he has already done? We don't know that. He might be lying. He lies a lot. I've seen this analysis and I've drawn i've done my own exercises but there's just so many variants that could be different that i i i cannot marry with a number i got you yeah that makes sense el sabor doesn't have checks and balances there it has power concentration in one person

uh and so there's no not really a way to be certain or to be sure of how much the government is spending. But I think if you go through the history of Bitcoin, it's a tool that was created for financial freedom, for privacy, for defending the individuals against the power of corporation and government. And then you have that in El Salvador, it's being imposed on all of us that we are all essentially crypto investors because the money that's being used

is from the taxes and more actually, more literally from loans that the Salvadorans will have to pay with their taxes. And this is being forced on us. It has been imposed on us and we don't have a saying on how the president buys the Bitcoin. So despite how unpopular it is, Bukele is plowing ahead with this Bitcoin plan. And it's led to a lot of questions around why.

going ahead with this Bitcoin plan. And it's led to a lot of questions around why. It's a really good question. I really think that the situation, the economical situation is that El Salvador has its back against the world. And it would have to be in a position of negotiating with the IMF and with the Biden administration.

And that's just not gonna happen. So far, there are no signs that Bukele's government is going to back down. El Salvador's treasury minister, Alejandro Zelaya, responded to the IMF's call to drop Bitcoin as legal tender. He said, quote, Bukele, in his very Bukele way, responded with a meme from The Simpsons. And it's hard to explain, but it's basically a middle finger to the IMF. Of course, there are good reasons why a developing country wouldn't want to be beholden to the IMF. For a lot of countries, IMF loans haven't worked out all that well.

Critics point out that the conditions of IMF loans have't worked out all that well. Critics point out that the conditions of IMF loans have often included tightening budgets and cuts to crucial social programs that end up disproportionately affecting poor people. This results in higher unemployment, more poverty, a deeper economic crisis, and ultimately the country losing control over their financial system and landing in a vicious cycle of debt. All this at the hands of an institution that's largely funded by the United States and its rich allies, which is why critics of the IMF see it as a way for richer Western countries to exert control over the economies of developing nations.

We don't have to pretend like the IMF doesn't have a political stake and only has best intentions for developing countries. But still, Nelson's been watching, and he's worried. El Salvador owes $800 million in bonds. That's money the government has borrowed from investors. And those funds need to be repaid by next year. I don't know if we're going to come to a place where he's putting like all the eggs in one basket because he really doesn't have any more baskets to put eggs on.

But the economical situation is very critical and will be for the next two or three years. I don't know. It's very unpredictable. What I do know and what I keep hearing is that there are little fires starting everywhere in Salvador where municipalities are not being able to make or to fulfill all of their financial obligations. And they depend a lot on the funds that the government, the executive branch transfers to them. You're starting to see a picture that doesn't look good and that may result in widespread protests. The average Salvadoran doesn't have time to check on the macroeconomical analysis

and to see all these charts. But they are going to notice when the trash trucks stop picking up the garbage in front of their houses. And if you keep spending money on these magic beans from the internet, which may result in the future in economical gain, but governments need liquidity. And in the meantime, the price is tanking and it's so volatile that whenever Elon Musk tweets,

the price drops or goes up. Yeah, it might not be a wider way to conduct an economy and a government. And that's all for this week. You've been listening to Nothing is Foreign. Our producer is Joyta Sengupta. Our showrunner is Adrian Chung. And our sound designer is Graham McDonald.

Nothing is Foreign is a co-production of CBC News and CBC Podcasts. Willow Smith is our senior producer. Nick McCabe-Locos is our executive producer. Arif Noorani is the director of CBC Podcasts. I'm Tamara Kandaker. Thank you so much for listening, and I'll talk to you back here next week. This has been the first episode of Nothing is Foreign. Search for Nothing is Foreign on CBC Listen or your favorite podcast

app to hear more every week. For more CBC podcasts, go to cbc.ca slash podcasts.