I visited the 'Bitcoin Dictatorship' - Tech Nomad in El Salvador
If you've ever heard anything about El Salvador, if you've heard of Bitcoin City, of the fact that they legalized Bitcoin as tender in the country, this dream of a city that runs entirely on Bitcoin and sustainable energy and the city stands at the slopes of this volcano. Well, this are the slopes, and the city below is La Unión and that's where maybe someday Bitcoin City will exist. - [Reporter] El Salvador would be the first country to make Bitcoin an official currency.
- [Reporter] It's the evolution of humankind, so we're going there. - [Reporter] Nayib Bukele declared Bitcoin as legal tender. Bitcoin ATMs convert greenbacks into digital currency.
- [Reporter] Adopting Bitcoin as legal tender, as a legal currency. What does that actually mean? - [Reporter] President Nayib Bukele had promised Bitcoin City would be a tax haven for crypto enthusiasts. - In the months following this news, the Bitcoin community went crazy.
Finally, a country is proving that Bitcoin can be used as a currency. And on the other hand, of course, critics of the government, critics of Bitcoin, the IMF, they all came out to say that was a terrible idea. - More than a thousand people marched in El Salvador's capital on Tuesday to protest the government's adoption of Bitcoin as a legal tender. - [Critic] What's it going to be for? Illegal use and attractive place for money laundering. - So, which is it? For a YouTube channel, for a news outlet, for a crypto influencer, it's just so easy to send someone and capture what they need to reinforce their argument and to sell what they're selling.
- Bitcoin can never be bankrupt, can never owe anyone anymore, can never scam you, Bitcoin can never hurt you, and I'll keep saying that until the day I die. - Bitcoin is a sexy story, it gets views, and so does criticizing it. The government strictly and selectively filters out what you see about the country.
And of course, the government, all they want is praise. I'm Costa Rican, I'm just a hop away from El Salvador border. Even for us who share a language, who share culture and food, El Salvador feels distant and it's become hard to trust the news that come out of the country. But to understand what it's really like, we have to see it for ourselves. We came here with an open mind. We came here with our Bitcoin wallets.
Welcome to El Salvador. This is the first country in the world to legalize Bitcoin as a tender, as an official currency that you can pay things for. I've been meaning to come here for a while and take on this challenge. Just pay with Bitcoin, everything. We left all our cash at home. And we spent over a week in the country talking to the locals, visiting the town that could become Bitcoin City.
We wanted to understand if Bitcoin will be a transformative force for a country that's still struggling to find footing after a very deadly and very painful 20th century. We wanted to understand if the success story is here for others to learn, or if this is just a mirage. I don't think it's gonna work.
I think we're gonna have to pull the plug, start paying stuff with the credit cards. I don't think we can survive a whole week with this. You know, my family was not excited about me coming to El Salvador this week.
Like there's still this concern and this vibe of how dangerous of a country El Salvador is. To you understand what Bitcoin can do for this country, despite all the controversy and all the complications of adopting Bitcoin as a currency, you have to understand a little bit about El Salvador. It's a small central American country bordered by Guatemala, Honduras, and the Nicaragua, facing the Pacific Ocean. And it's spent the '90s and 2000s recovering from a devastating civil war. - [Voiceover] The fighters are young, some very young. Nicaragua and the Soviet block are major suppliers.
- [Reporter] The law here has just been changed to allow them to be detained without trial for up to six months. - Gang violence turned it into one of the most violent and dangerous countries in the world, but that's not the country we traveled to. El Zonte is where this Bitcoin movement started. It's a small surf town about an hour away from the capital.
- In El Salvador, the reason that El Zonte has become a hotspot for tourism, in my opinion, originated with the surf. Even with Bitcoin, I think it's still the same. You get Bitcoiners who are surfers, Bitcoiners who are looking for a place that is affordable, a place where they feel comfortable. And right now, El Salvador I think ticks a lot of those boxes.
- I think you can live just with Bitcoin in El Zonte. There's a solid argument that the government has succeeded with that messaging. - El Zonte Beach. - El Zonte. - El Zonte, El Salvador.
- Nationalizing Bitcoin put the country on the map. People came to El Salvador for that reason and El Zonte is just living proof of that. - Most restaurants, hotels, street vendors, around El Zonte accept Bitcoin. And I think that's great, but in practice, well in practice, things are more complicated.
- This place where we had dinner at, it won't take Bitcoin, which actually means I need to get cash out. Without breaking our own rules, I will need to withdraw cash from the ATM. 28,000 to 80. They're selling it at 31,997. And then if you wanna cash out, it's 25. That's a big spread.
Because of the way Bitcoin and the blockchain works, you need to wait for transactions to be confirmed in the network, that is, that the transaction is added to the block, that the block is mined. And Bitcoin specifically new blocks are mined normally about every 10 minutes or so. That means that at best it will take about 10 minutes for a payment to be confirmed in the blockchain. I'm not going into details about how the blockchain works.
We already made a whole video about that. It's one of my favorite videos in the channel, 'cause we used subway trains and it was really cool. I'll link it in the comments. You can watch it later.
All you need to understand for now is that transactions take a while to confirm. Like the person who's receiving the money can't confirm that you sent that money until 10 minutes or so later. The ATM needs to wait for confirmation. Kinda knew this could happen, but in practice, when there's this guy, when there's a guy waiting at the restaurant, 'cause don't take cash, it's their fault for not taking, I mean, it's my fault for not bringing cash, their fault for not taking cards.
It is awkward to just be standing here. Waiting for the, oh God. Seven minutes, block time, what, is 10 minutes these days? One confirmation. Okay, there you go.
It should happen now. Withdrawing. Get this. Get my phone number. There we go.
Trade. So to counter that transaction time, what some businesses in El Zonte have done is adopt wallets that run on the Lightning Network. Lightning Network is this layer that operates on top of Bitcoin.
But this is a niche solution. It's growing, but it's not widely adopted. I mean, just look at the subreddits on the Lightning Network versus the Bitcoin subreddit. You need to run your own node.
I tried. I tried for hours and I could not solve this while I was there. And that's kind of the point. El Zonte is a bit of a bubble. It's a town for tourists with prices for tourists that reminded us a bit about Nosara and our experience there a couple years ago.
But how does this translate to the rest of the country? - To understand Bitcoin, Bitcoin is a whole bunch of technologies put together. So we're dealing with 70% of the population that, in this country, doesn't even have a bank account, doesn't have access to a bank. So trying to get them to understand the value of Bitcoin is very difficult, right? Because they don't even have an understanding of what money is. They've never been able to go to a bank and withdraw and understand exchange rates, right? I mean a personal opinion, like a decade from now, right? Because I mean, the dream or the expectation and the marketing that was put out there is this big grandioso kind of city, like the Vatican you would say, right? And that takes time.
I mean, if you go and you look at Conchagua and where it's supposed to be, there's really no development there. - Now La Unión is this beautiful small fisherman's village around the southeast corner of the country. And one year ago, there was this good chance that we would've been robbed on our way here. MS-13, or Mara Salvatrucha, is a gang that basically ran the country up until recently. They would've thrown rocks at the car or found a way to blow our tires so that we would stop and then rob us.
If one of the members of the robbery was on their initiation ritual, we might have been killed as well. But again, that's not the El Salvador that we're in and we're gonna talk about this later on. For now, what you need to know is that thanks to how safe the country has become, small and remote towns like La Unión are now reactivated.
This dormant volcano, Conchagua, overlooks Honduras and Nicaragua with dozens of small islands in the bays. It is really beautiful. But then of course we wanted to understand how much they knew. If they understood that their city could be years away from being drastically transformed.
- The truth is, outside of El Zonte, the places where you can pay with Bitcoin are few and far between. - Most people don't understand Bitcoin. They don't really get what it is or why its value changes so drastically or whether or not they should be investing or keeping any money in Bitcoin. And most of them don't have the money to really speculate with Bitcoin.
It's just too risky. The median income per adult in El Salvador is $440. But here's a catch, it's not easy to find people that criticize the government's policy, especially on camera. I actually printed a copy of the Bitcoin law and don't think that I spent too much paper on this. It's just three pages long. The part of the three pages is this intro on why the law exists and sort of like justifying why it happens.
So it actually starts on the second half of page one and it ends on the first part of page three. So it is like, what, page and a half. 16 articles. Again, this first part just talks about saying like why the law is needed and the fact that most people in the country don't have a bank account, but it is essentially states that every single price in the country can now be stated in either Bitcoin or USD.
You can pay taxes in Bitcoin and then, for example, article 7, which is interesting, every economical agent or every store, commerce whatever, must accept Bitcoin as a form of payment when it's offered by whoever's purchasing that good or service. This is obviously not enforced, 'cause with this, supposedly, every single store in the country should be able to accept Bitcoin, which is of course not true. To motivate people to download Chivo wallet, which is the government owned Bitcoin wallet, they gave everyone in the country $30. And you could just redeem this by verifying your ID and then taking the money out.
So we spoke to Ruth Lopez about this. Ruth runs a nonprofit organization that has taken the tough, maybe dangerous task, of suing the government about many of its actions surrounding Bitcoin adoption, 'cause scams around Chivo Wallet were really common and apparently not that hard to accomplish. - Many people were just as scared to download the app altogether or to be prosecuted for taking the money out and not continuing to use it on the Chivo of wallet or to keep it in Bitcoin. - The government didn't really wanna say how much they paid to develop this wallet, but you can't escape the IRS. And then SEC filings by a US company called Athena Bitcoin Global confirmed that their contract was around $5 million to build this app.
Not only that, but the country's been investing in Bitcoin as well, of course with taxpayer money. The country now owns around 2,300 Bitcoin and the president trades naked on the toilet according to himself. Now they bought most of that bitcoin around the time that Bitcoin peaked at $50,000 per Bitcoin.
So that would be around $105 million. That means that today, as we are shooting, their crypto is worth around $30 million less. But it's not for me to guess if that's gonna pay off. - [Reporter] As crypto crashes, the central American country's investment is now worth roughly half what it paid. - [Reporter] Is this country gonna default? - [Reporter] I mean, that's the question that everybody has right now.
- The point is, say what you will, we're here, aren't we? We came to El Salvador because of this. It's a country that's being talked about because of crypto. They're getting free views on our channel, even if people don't adopt it. Can we call this a marketing stunt? And if so, can we measure it as a marketing stunt, as it's like a country promotion brand thing? What's the ROI of this marketing stunt versus the country's income from tourism? But more than Bitcoin, there's another more crucial reason why we're here, we're here because it became much safer to travel to El Salvador, and both of these things, Bitcoin and tourism and how safe the country is, both of these things are closely knit together. But to explain that, we're gonna need a bigger table.
So to answer that question, we have to look into how El Salvador got here. And it's not an easy question to answer and it is a bit outside the scope of what we usually do. We were unsure if you really wanted to tell this part of the story, but it's just too crucial, too important to understand El Salvador today. In the early '90s, the Civil War had just ended. For 12 years, El Salvador was this proxy war nation. The US funded really, really a tyrannical military and government in an effort to strengthen their presence in the region against the evils of socialism.
The Soviet Union on the other side funded a guerilla that was trying to topple the government. This was a bloody and painful period for the country that left over 75,000 people confirmed dead, thousands more disappeared. The scars of the Civil War are fresh and alive for everyone in El Salvador. It was a very painful period for a country and they're still just recovering from what happened.
But perhaps the most painful reminder of this time, that's recent and intangible, is the gangs, Barrio 18 and MS-13. During the Civil War, thousands of Salvadorians sought asylum in the US or they just migrated illegally, mainly to haven cities like Los Angeles. And it wasn't those cities where the Maras started.
The excuse was protecting Salvadorians from other gangs in the city. But still, MS-13 quickly rose to become just one of the most violent criminal organizations in the world. After the Civil War ended, many of them were rightfully arrested and then deported, deported back to El Salvador. And this process broke the country. MS-13 is violent and ruthless.
It grew to around 60,000 members in the '90s and 2000s. This is organized crime at a level that few countries around the world have seen. The Maras changed society in Salvador, it made it the fourth most violent country in the western hemisphere.
Gang members murdered people for sport as part of their initiation rituals. Women were disproportional victims of domestic violence and robberies and sexual assault. And the country, the country became a hostage to its gangs. During the years after the Civil War, the government was busy with economic reform.
In the year 2000, for example, they adopted the US dollar as their main currency. And they were trying to find the culprits for the war crimes, trying to find somebody to blame. But economically, the country was stalling. Nobody wanted to invest in such a violent and dangerous country and nobody was solving the problem with the gangs. Right and left-wing presidents came and went. Some have been convicted or exiled, because of corruption during this, during their term.
But in 2019, this young businessman who was the mayor of San Salvador, or the capital, won a landslide election and to become the first Salvadorian president in almost 30 years that didn't come from one of the major political parties, which had also played a part in the war. Nayib Bukele was able to form this strong coalition around him, enough to secure a super majority in Congress and to pretty much pass any legislation that he wanted. Immediately after he came to power, the murder rates in El Salvador just dropped drastically.
Independent newspaper, El Faro, who recently had to move down to Costa Rica, their headquarters, because of fear of prosecution by the government, they accused the government of making a deal with the gangs to reduce murders and to make this new government seem successful. And there are hundreds of documents and logs of government employees visiting these gang leaders in jail. US intelligence has come to the same conclusion as well. But of course the Salvador government denies any deal with the gangs. But this didn't stop Bukele, he and his brother are just skilled marketers and they've built this narrative around their rule that has earned him the highest approval rating of any current president in the entire world. Deal or no deal with the gangs, things started getting worse again.
And then on a single weekend in March 2022, 80 people were murdered in the country. This is the most violent weekend in over a century. The fragile balance that had been struck with the gangs had broken. But this time the government had the support, they had the political power to strike the hammer. With Congress and with overwhelming support of the population, plus this strong visual and aggressive campaign around the crackdown on crime, in March 27th, 2022, the government - It implemented a régimen de excepción, a state of exception, in the country, which allowed them to temporarily remove four constitutional rights, the freedom of association, the right to a trial for people that have been arrested, the right to privacy, which essentially allows the government to tap any phone without a warrant, and the maximum amount of time that you can be arrested without being charged. So in other words, the government in El Salvador can arrest anyone for any reason, for as long as they want.
Curiously, the Dark Knight trilogy explores this legislation almost quite exactly, it's the Dent Act. - 1,000 Inmates in Black Gate Prison as a direct result of the Dent Act. - Maybe that's where they got the idea. Funny now, Bukele apparently has like this internal alias with people in his government and they do call him Batman. - 66,000 people have been arrested in El Salvador, which turned it into the fourth country with the highest incarceration rate in the entire world. - This video went viral around the world and we're just about to fly out to the country, already planning this video.
And I've really struggled to decide, like, to decide how I feel about this. These people are ruthless murderers. So how do you fix a country that's been taken hostage by its criminals? Can you realistically put them all on trial, assuming that none will slip away, that the prosecutor's families won't be threatened, and that no judge will be bought out? Can you trust the legal process in a country that's so badly sunk in crime? - 527 counts of obstruction of justice. How do the defendants plead? - I mean, we should be able to trust them. All the legal due process should be the solution always. But it seems genuinely that El Salvador was just long past that option.
And on the other hand, of course, this is an obvious and flagrant overstep of human rights. Well, they deserve the human rights that the world has agreed that every human has, even if they didn't honor those rights for the people that they murdered. I think that this is a debate with no right answer. And we were concerned about bringing this to a video, but the thousands of arrests the police has conducted were mostly based on appearances. Ironically, the MS-13 look, that for so many decades terrorized the country, became their obvious giveaway and it made it so easy for police to identify them. Some other arrests have also happened, because people have denounced suspicious behavior.
But what happens if someone is arrested by mistake? - What happens if an innocent person is arrested? How do you prove their innocence when no one is even expected to go to trial? The only glimpse that anyone has into what's happening in those prisons is what the government carefully produces and releases to the public in these marketing videos that they make. The state of exception, the régimen, was supposed to last for a month, but while we were in El Salvador, it was renewed for its 12th term, marking the first full year of exception. We felt safe. We walked with the cameras and drones and gear, looking like obvious tourists in rural communities around the country, and not even once did we feel unsafe. There are truly few developing countries around the world where you can experience something like that. Most Salvadorians support this decision and no one, not even those who criticize or who are against Bukele more strongly can deny how much this measure has, it has transformed the country.
But what happens next? And this is where I think the things may take the darkest of turns. So here's the dictionary definition of this. "Authoritarianism is a political system characterized by the rejection of political plurality, the use of strong central power to preserve the political status quo, and reduction in the rule of law, separation of powers and democratic voting."
This is quite exactly what's happening in El Salvador. Let's start with the media. Independent press is crucial to any democracy, but in El Salvador, most major press outlets are either affiliated directly or just plain out funded by the government.
For the few independent outlets that are left, reporters who work there, who have written any articles that denounce government actions are often put in their surveillance with cars that get parked outside their houses or the houses of their family members. - Many journalists have just chosen exile over that possibility. Also, re-elections.
So re-election is illegal in El Salvador, or rather it was illegal. During his tenure, Bukele was able to name enough supporting judges on the Supreme Court for them to allow consecutive re-election on the basis, wait for it, on the basis of human rights. So the next election for El Salvador is coming soon, early 2024, and it's almost certain that Bukele is gonna get re-elected. Now don't get me wrong, re-election is not a bad thing necessarily, but we've seen this story far too many times in Latin America. - An immensely popular president rises to power.
He is democratically elected, but he uses his power to sway the entire government to do their will, eventually letting them be re-elected indefinitely. This is Perón in Argentina, Ortega in Nicaragua, Evo Morales in Bolivia, Paraguay, Ecuador, Venezuela. Like we've seen this story so many times.
I told you, I'm originally from Costa Rica and oftentimes we feel like this green, we're not an island, but it feels like this green island in this tumultuous ocean. We grew up hearing these stories. We grew up hearing these stories from the immigrants and the asylum seekers that end up in Costa Rica who are escaping these dictatorships, because this is how they started. There is no law in El Salvador today that would stop the police from imprisoning anyone who speaks against the government.
Under the state of exception, arresting them would be 100% legal. But these examples are just too close to us to ignore. I mean, the closest one, Nicaragua, has seen hundreds of people dead or incarcerated, because they protested against their dictatorship.
The Nicaragua government has cracked down on the press so hard that it doesn't allow tourists to bring cameras or drones into the country at all. If we had driven from Costa Rica to El Salvador for this documentary, they would've taken all our gear at the border. I've been to Nicaragua before. I was there years before it got so bad.
And being in El Salvador now gives me this eerie feeling that in a few years, just standing here, making this YouTube video, might not be possible at all. I really hope that's not the case. And let's go back to Bitcoin, which brought us here for a moment. Seeing what has happened with Bitcoin, I really just can't see normal everyday people adopting a digital currency. It's too complicated, it's too risky.
And in a country where 70% of people don't have a bank account, there's a decades long journey to make them understand what a Bitcoin wallet is and how it works. As a marketing stunt, maybe it works, maybe this is a country PR stunt that has yet to pay for itself. Bitcoin or no Bitcoin, the truth is El Salvador is back on the map. It's back on the map as as the beautiful country that it is. It's back as a destination, as a peaceful and safe destination for tourists.
It takes a lot of time to build that trust as a country, as a destination, but the hardest steps I think have already been taken. But can this peace last? This video is gonna live on YouTube for many years probably and I want my skepticism to be proven wrong. I want to be wrong about everything that I've just said.
I want El Salvador to break out of the cycle of history repeating itself. All we can do now is just wait. I just finished watching the last version of this and I think it's gonna go ready for post.
And just wanted to thank you, 'cause if you're still here, you've essentially watched our longest documentary yet. This series, "Tech Nomad," is my favorite to make. These videos are normally the four to six month project, from pre-production, to actually traveling, to figuring out the story, and getting it peer-reviewed, and especially for this one that had so controversial topics to touch on, we wanted to make sure that we were on the right side of the facts. If you enjoyed this one, what I'd really love for you to do is to check out our video on Nosara, which is this small town in Costa Rica.
That's the first "Tech Nomad" video we made, but by far the one that maybe carries the more craft and insane animation and grading. And I would love it if you guys told me sort of like the differences that you find between these two videos and if we are actually going in the right direction with how the format has evolved. I'm gonna link that in the description. I'm gonna put like a video box somewhere around here on the screen. And yeah, please check it out.
Would love to hear what you think. Thanks again for watching and we'll see you next week.
2023-07-17 17:03
